United States: Summary Of HUD’s LEAN 232 Program E-Mail Blast: Office Of Residential Care Facilities (ORCF), May 7, 2014

Last Updated: May 21 2014
Article by Christine Waldmann Carmody and Blair L. Schiff

In an effort to summarize the highlights of the U.S. Department of Housing and Urban Development (HUD) LEAN E-mail Blasts that we receive, and rarely have time to review in a timely fashion, we at Pepper are providing this quick synopsis of the latest LEAN update. Our aim is to provide pertinent information succinctly as a roadmap to the LEAN E-mail Blasts, not to replace the LEAN E-mail Blasts. We hope you find these summaries helpful. A link to the complete May 7, 2014 LEAN E-Mail Blast can be found here.

New Keyword Feature in E-Mail Blasts

The Office of Residential Care Facilities (ORCF) has added a new "key word" feature at the end of every E-Mail Blast article to make it easier to search them, as well as help with the indexing of E-Mail Blasts on the newly updated ORCF Program Web site, here.

Roger Lewis Is Named Permanent Director of ORCF

After serving as the acting director of ORCF since December, Roger Lewis has been named ORCF director.

Update Regarding Paperwork Reduction Act (PRA) Process

When HUD published the ORCF documents in March 2013, the initial expiration date was just one year following the documents' effective date because HUD had not yet worked through certain electronic document submission matters. Thus, on September 10, 2013, HUD published a Federal Register Notice setting forth the proposed electronic submission policy and invited public comment. After the 60-day comment period elapsed, with no comments received, HUD published its second Federal Register Notice on February 27, 2014. This second publication repeated the proposed electronic submission policy and added the newly revised Intercreditor Agreement. Public comments have been received, are being reviewed, and ORCF is in the process of responding.

HUD anticipates republishing documents shortly, and with the new OMB approval and inclusion of the revised electronic submission policy, the effective period will be for three years from the upcoming publication date.

Sample 241(a) Documents Posted Online

ORCF historically has not had separate 241(a) documents and instead program participants would revise the Section 232 documents to fit the details of a transaction. ORCF has now posted sample 241(a) loan documents to its Web site; the current sample documents were drafted for a situation involving different lenders from the original and supplemental loans. ORCF acknowledges that this will not be the situation for many 241(a) transactions, and therefore examples of additional scenarios may be added as sample documents in the future.

Since the 241(a) documents are samples, these documents are negotiable and ORCF is amenable to transaction-specific changes. For example: (a) changes to the Borrower Regulatory Agreement to (i) permit combining the replacement reserve for the 241 loan and the replacement reserve for the first mortgage loan and (ii) recognize that there would be only one residual receipts account for the project; (b) changes in the Operator Lease Addendum to reflect the existence of two loans; and (c) necessary changes to the Lender's Certificate in the Request for Endorsement.

Section 241(a) borrowers will be subject to two different forms of regulatory agreements if the original loan was made under the pre-July 12, 2013 documents, since they will be using the new form for the 241(a) but will have the old form in place for the underlying loan. If the documents do not match in certain requirements, Borrowers are required to meet the requirement that is more stringent. For example, although the most recent regulatory agreement permits frequent distribution of surplus cash, the old form regulatory agreement allows for only semi-annual distributions, thus the Borrower is limited to semi-annual distributions.

Use of New Documents in Application Submission

Lenders are reminded they must use the approved ORCF forms (here) when submitting Firm Applications. It is not acceptable to mix old and new documents in an application (except in circumstances where existing AR financing or master-lease transactions are being modified, as indicated by the New Document Implementation Matrix).

Updated Firm Application Checklists Posted Online

ORCF has made edits to the Firm Application Checklists posted on the Section 232 Program Web site. You can find checklists for the 223(a)(7) application here and for 223(f) here. The edits are predominately scrivener's errors, but there are also some corrections and clarifications included, to ensure consistency with other documents and policies.

New Construction, Substantial Rehabilitation, Blended Rate and 241(a) Legal Documents

For use on applications received after May 11, 2014, a legal punchlist and checklist for 232 NC and SR and blended-rate transactions has been posted on ORCF's Web site. The HUD Attorney Closing Checklist can be found here and the Attorney Closing Punchlist is here. These should also be utilized for Section 241(a) projects, but may require transaction-specific modifications.

Effective immediately, OGC will complete their legal review after issuance of the firm commitment for New Construction, Substantial Rehabilitation, Blended Rate and 241(a) projects. OGC will only complete an "up front" legal review on projects with a master lease and/or accounts receivable financing. The instructions on the first page of the punchlist include a list of documents to be submitted for "up front" legal review. ORCF reserves the right to request an "up front" legal review in certain situations.

Changes in Contractor Processing

ORCF has modified the process of assigning loan applications to the underwriting contractor. Previously, the application was assigned to the contractor, and then held in a pool until ORCF completed the appraisal and environmental review, before being assigned to an underwriter. Going forward, the contractor will assign the application immediately to the underwriter, without waiting for the appraisal and environmental review to be completed. The contract underwriter will now become the single point of contact, and lenders will be able to track the application more easily.

Section 106 Historic Preservation Reviews

Lenders and Third-Party Phase 1 preparers are reminded of the importance of submitting complete information to the State Historic Preservation Officer (SHPO) for use in the Section 106 consultation. Lenders should check the SHPO's Web site prior to submitting a request for consultation, because some states have their own process and submission requirements.

24 CFR 232.7 'Bathroom' Waiver

In the November 12, 2013 E-Mail Blast, ORCF indicated that it would provide expedited processing of requests for waivers of 24 CFR 232.7 that met certain criteria. However, ORCF has realized that it cannot make a full and fair determination prior to reviewing the full underwriting of the application. Therefore, all Bathroom Waiver requests will now be reviewed by the HUD Underwriter concurrent with the mortgage insurance application. Lenders are reminded that requests for waivers of 24 CFR 232.7 "Bathroom" will only be approved in unique and exceptional circumstances. The LEAN Update provides some criteria that applicants for the waiver should consider.

Lenders and borrowers that present mortgage insurance applications that are not in compliance with the regulation accept the full financial risk of processing and submitting loan applications, which may not receive waivers. Lenders and borrowers must take into consideration that the waiver request may not be approved, and must be prepared to present a plan to ORCF that brings the facility into compliance with 24 CFR 232.7 "Bathroom."

Loan Committee Relies on Trailing 12 (T-12) Data

ORCF has long emphasized the importance of actual trailing 12-month data (see the E-Mail Blasts of June 26, 2013, September 1, 2011, and May 4, 2010). ORCF urges lenders to include this trailing 12-month NOI information early in the process, and to update it as appropriate, so that the Loan Committee can readily review the most recent actual historical data.

Revision to New Document Implementation Matrix

ORCF published its New Document Implementation Matrix in the November 12, 2013 E-Mail Blast. The AR Financing Transition Policy of the matrix, starting at the bottom of page 1 (here), has been revised to clarify that "all new AR related documents" (rather than "all new documents") are required for all new accounts receivable lines submitted on or after July 12, 2013, and for previously approved accounts receivable lines that undergo a Substantial Change (as defined therein).

Adoption of New Phase I Environmental Site Assessment Standard

The Office of Housing – Federal Housing Administration has officially adopted ASTM E 1527-13 as the required standard for Phase I Environmental Site Assessments for all programs. A Federal Register Notice implementing the new standard was published on April 16, 2014 and is available here. As a result, wherever ASTM E 1527–05 is referenced in Office of Housing-FHA guidance, participants in ORCF programs must use ASTM E 1527–13 effective May 16, 2014. Submissions before that date may use either the new standard or ASTM E 1527-05.

Financial Statements

Borrower/Owner

ORCF reminds lenders that all owners are required to file an audited financial statement in the REAC-FASS system. Financial statements must be input into the REAC-FASS system 90 days after the end of the fiscal year. For projects whose fiscal year ended on December 31, 2013, there is a global extension to April 30, 2014.

Lessee/Operator

Currently, lessee/operators may or may not be required to file an annual financial statement – depending upon the language in the particular project's lessee/operator Regulatory Agreement. If required, the financial statements have the same due date as the borrower/owner financials statements – including the 30-day extension to April 30, 2014 for those with a fiscal year ending December 31, 2013. At this time, operator statements cannot be filed through the REAC-FASS system electronically. For FY 2013 financial statements only, if the required financial statement has not already been submitted to HUD, ORCF requests the financial statement be sent to 232operatorfinancialsfy2013@hud.gov. E-mail submissions are preferred, but hard copies will be accepted. The LEAN Blast includes the appropriate address to send hard copies.

ORCF is developing a portal to accept quarterly operating financials. ORCF expects to beta test this over the summer and have the new system fully operational for the first quarter of 2015.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Blair L. Schiff
 
In association with
Related Topics
 
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions