FHA Insurance and LEAN Section 232

Basics of FHA Insurance:

HUD/FHA provides mortgage insurance on loans made by FHA-Approved Lenders.  Proposed projects are evaluated on the basis of whether the proposal is an acceptable insurance risk for the FHA Insurance Fund.  It is not a competitive process.   

Two page fact sheets on all of the FHA Insurance programs are available at the following link: 

http://www.hud.gov/offices/hsg/mfh/progdesc/progdesc.cfm

Additional basic information on FHA Insurance programs is available at the following website: http://www.hud.gov/offices/hsg/mfh/map/maphome.cfm.  This portion of HUD’s website contains links to the MAP Guide (Chapter 3 contains basic information and Chapter 8 contains information about loan sizing) and a list of some of the lenders who do FHA Multifamily loans.  If you are interested in submitting an application for an FHA-Insured loan, please contact one of the lenders listed on this website – they can walk you through the process.  

Basics of Section 232:

Section 232 is an FHA-Insured loan product that covers housing for the frail elderly – those in need of supportive services.  Nursing homes, assisted living facilities, and board and care are all examples of this type of housing (a project may include more than one type). 

Section 232 may be used to finance the purchase, refinance, new construction, or substantial rehabilitation of a project.  A combination of these uses is acceptable – e.g. refinance of a nursing home coupled with new construction of an assisted living facility.

LEAN Processing of Section 232’s:
 
HUD developed its LEAN process in 2008 for Section 232 applications – it only applies to Section 232 applications.  Previously, loans were processed under Multifamily Accelerated Processing (MAP) or Traditional Application Processing (TAP) by the local HUD Field Office.  It should be noted that non-Section 232 projects will continue to be processed under MAP or TAP. 

Whichever process is used (as mentioned above), applications for mortgage insurance are assembled and underwritten by FHA-Approved Lenders before submittal to HUD for processing  of the Firm Commitment (there is also a Pre-application process for projects with new units whereby HUD comments on the market).  

HUD’s new LEAN process employs standardized work product and processes to obtain a consistent, timely result.  The following are some of the changes implemented with the LEAN process:

1. We have developed standardized checklists, statements of work for third party work, certifications, and templates for the lenders to use in their assembly of the application package.  Moreover, we have developed standardized punchlists for HUD staff to use in their underwriting of submitted applications.

2. HUD begins its legal review immediately when the Firm Application is submitted – to cut down the time between Firm Commitment issuance and closing. 

3.  We have removed portions of the application process/requirements for submittal that were duplicative or not necessary (e.g. no need to submit closing related documents that are submitted with the Firm Application twice, removal of forms that are not needed, development of consolidated certifications, etc).

4.   We have revised the third party appraisal requirements so that the appraisal is a market appraisal – no requirement to use HUD forms and no proprietary earnings carve out.

Phase in of LEAN Processing of Section 232’s:

• Effective September 1, 2008, all Section 232/223(f)’s (refinance or purchase of projects that are 3+ years old that are not in need of substantial rehabilitation) are required to be processed using the new LEAN process.
•  Effective March 1, 2009, all other Section 232 loans (including new construction, substantial rehabilitation, supplemental loans, operating loss loans, and Section 223(a)(7) loans) will be processed with our new LEAN process.  The lender has the option of submitting these types of Section 232’s via LEAN or MAP/TAP until then.
• Any loan application that was submitted MAP/TAP to the Field Office prior to the above dates, may continue to be processed under MAP/TAP all the way to Final Closing.