Spreadsheet: c46b8612-c891-4aae-92d9-7630cbb90abd
Sheet: Intro.-General-CH.1 & Misc.

[NAME] | ANSWER | Last Updated
What does "LEAN" stand for? | LEAN is not an acronym, but rather is a methodology used in processing Section 232 loans.  It is based on the Toyota model to increase efficiency by reducing waste.  Reductions in processing variability and non value added activities are explored using value stream mapping.  Full use of the internet and value added software tools for application submission, underwriting and closing, as well as punch lists are resources currently being developed and implemented for the LEAN Section 232 program. | 2012-02-01 00:00:00
How does OHP handle Assisted Living Admission Fees or other similar fees? | Under LEAN, OHP is continuing with HUD's long-standing policy that prohibits projects with substantial entry fees (life care, or otherwise termed). | 2012-02-01 00:00:00
Would HUD consider a transaction with entrance fees/founders fees, if they are 100% refundable to tenants when they leave the facility? | HUD will not insure such a project as there is the issue of residents having to put up a lump sum to enter the facility – one of HUD’s concerns related to entry fee projects is affordability/access to all. | 2012-02-01 00:00:00
Will OHP consider a transaction in which an IL/AL community charges assessment or community fees?  What can these fees cover?  What must be disclosed to OHP? | A community may charge a reasonable assessment fee (usually about $2,000 +/-).  It must be understood that the assessment fee is to cover the costs associated with the services provided by the community related to a new resident entering (i.e. initial physical and cognitive evaluations for placement in the appropriate level of care, review of physician recommendations, medications administration, development of individualized care plans, etc.).  Unit turnover costs (i.e. new paint and carpet) should not be included in the assessment fee – those items are viewed as routine repair and maintenance (or perhaps capital replacements) and should be included in the appropriate budget.  It must be disclosed if any or all of the assessment fee is refundable and under what circumstances (for example, many AL communities have a 90-day amortization of assessment fee).  Also, please note that a community must agree to waive the assessment fee for Medicaid residents, if any. | 2012-02-01 00:00:00
What action needs to be taken if the number of beds being used in a facility change during the time the deal is in the queue? | It will be necessary to update the application to indicate the correct number of beds and to insure the calculations are based on that new number.  There is no need to revise the 2530s if the only change is the number of beds in a facility. | 2012-02-01 00:00:00
Will HUD consider non-profit entities for the Section 232 program? | Yes | 2012-02-01 00:00:00
Are non-citizens allowed to participate in Section 232 transactions? | Non-citizens can be participants (including owners) if they get ITINs.  We would expect the lender to conduct the standard due diligence and provide the standard exhibits on such participants.  Here is info from the IRS on ITINs:    http://www.irs.gov/individuals/article/0,,id=222209,00.html | 2012-02-01 00:00:00
Would OHP consider a refinance of a transaction under LEAN whereby the Mortgagor acquired the property in the form of a land contract?  Would it be treated as a refinance or a purchase? | HUD will not approve a deal with a land contract.  The Mortgagor must own the property – in the event of a default/foreclosure, HUD must have clear title to the property. | 2012-02-01 00:00:00
Is it acceptable to HUD to include live-in caregiver (employee rental) units and guest/visitor units for overnight family stays as eligible costs for the mortgage? | OHP will allow the inclusion of guest/visitor unit costs in the mortgage as commercial space and income, subject to percentage limits.  It cannot accept residential units for care takers to be included in the mortgage amount, given that the 232 regulations do not allow for residential units. | 2012-02-01 00:00:00
Under LEAN, will HUD allow site inspections to be conducted by someone other than the LEAN Lender underwriter of record for a particular transaction? | On projects involving the addition of beds/units (through new construction, substantial rehabilitation, or Section 241(a)), the Lender’s Lean Approved Underwriter of record on the project must inspect not only the subject site but also the market competitors and/or comparables from the appraisal/market study.  HUD is not requiring inspection of all comparables listed in the appraisal/market study – it is up to the [NAME] to determine which comparables will give them enough information to become familiar with the market.  On Section 223(a)(7)’s, requires a lender inspection on 223(a)(7)’s submitted without a new Property Capital Needs Assessment.  The inspection can be performed by either the Lender’s Lean Approved Underwriter of record or by a qualified construction site inspector employed by the lender (so long as this individual is not connected with the loan origination).     On Section 232/223(f)’s, the site inspection must be performed by either the Lender’s Lean Approved Underwriter of record or by a qualified construction site inspector employed by the lender (so long as this individual is not connected with the loan origination).     HUD pre-approval of the qualified construction site inspector is required.  An Underwriter Trainee can also perform a site inspection; however, the site inspection report should then be reviewed and certified/signed by the Lender Underwriter. | 2012-04-01 00:00:00
Is it considered an Identity of Interest if the management agent owned by the seller is, and will continue to be, the management agent? | If the buyer and seller are non-identity of interest parties and neither has an identity of interest  with the operator, then OHP would consider this arrangement to be acceptable. | 2012-02-01 00:00:00
Would a leasehold situation between the current mortgagor and the future mortgagor preclude a transaction from being considered arms length (forcing a project to be processed as a refinance)? | As long as there is no identity of interest between the two parties, this project can be processed as a purchase. | 2012-02-01 00:00:00
How long past a 232 transaction is an identity of interest  seller/operator precluded from coming back in as an owner/operator? | OHP will not allow the identity of interest  operator back into the project for the greater of 2 years or the initial term of the operating lease. | 2012-02-01 00:00:00
When do [NAME] wage requirements apply to a 241(a) Supplemental Loan project? | It is based on the Section of the Act (SOA) and the requirements of the original loan:  If the first mortgage was a 223f, [NAME] wages would not be required on 241a.  If original loan required [NAME] wages, the 241a would also require them. | 2012-02-01 00:00:00
Does OHP have a designated person/office to respond to Freedom of Information Act (FOIA) requests? | No, FOIA requests for HUD are handled through a central location, which can be found using the link below.  Please note that there are frequently requested materials listed in this link that should be explored before making a new, formal request to HUD.  http://portal.hud.gov/hudportal/HUD?src=/program_offices/administration/foia | 2012-02-01 00:00:00
Do you have  statistics you could share on the number of new construction projects submitted this year, the number approved, and the number rejected? | We publish these statistics on our website:  http://portal.hud.gov/hudportal/HUD?src=/federal_housing_administration/healthcare_facilities/section_232/lean_processing_page/underwriting_guidance_home_page  There are 2 reports that may be of interest to you.  First, follow the link to Weekly Statistical Report – this shows counts of applications received, commitments issued, rejected and closed by type (223f, a7, new construction).  Second, follow the link to FY 2010 (or 2011) Lean Closings.  This report shows the actual project name of loans that closed during the fiscal year by type (223f, a7, new construction). | 2012-04-01 00:00:00
If doing a 223(a)(7) on a fairly new project (less then 10 years old) and a PCNA is not required, is an underwriter (or designee) inspection is still required? | A site inspection is always required for a refinancing. Depending on the situation, the required inspection may be a PCNA or it may be an underwriter’s site visit. Here’s the applicable language from the February 6, 2009, email blast:  If a PCNA is not submitted with the Section 223a7 application, the Regulatory Agreement on the new Section 223(a)(7) loan will contain a requirement that a new PCNA will be required at the earlier of: 10 years after the previous PCNA was submitted to HUD or 10 years after the existing FHA Insured loan’s amortization period have passed.   Moreover, the lender will be required to inspect the property.  The report on the site visit to the OHP underwriter should include the minimum of:  1. Date of visit 2. Name of Lender Rep/Qualifications (should be an UW, appraiser or [NAME].) 3. Overall assessment of project’s condition 4. Confirm compliance with state/local reqs/codes 5. Outstanding REAC issues addressed 6. Who they met with on site (project Administrator, etc.) | 2012-04-01 00:00:00
What percentage is correct to use in the HUD-92264a - 80 or 85%? | The percentage of value used in Criterion 3 on line (a) of the HUD-92264a should be the loan to value in the Section 232 Statute/Regulations.  The lender narrative will contain a discussion of the actual underwritten LTV (including discussion of justification/mitigation if the underwritten LTV exceeds the Lean Benchmarks summarized in the February 19, 2010 Email Blast).  In addition, the attached "92264-A Attachment" must be submitted together with the Form HUD 92264-A to assure that additional LEAN criteria have been considered in determining the mortgage amount. (Those criteria are not mandatory, but should be used unless mitigation has been offered and discussed in the lender narrative.)  This document will be attached to the signed Firm Commitment. | 2012-04-01 00:00:00
We have an applicant that needs to do a sprinkler upgrade to comply with the new law.  Does HUD have any available options? | In addition to being able to do these upgrades in connection with a 223f or 223a7 refinance, HUD also has an existing program authorized under Section 232 (i) of the National Housing Act called the  Fire Safety Equipment Loan Program.  The Fire Safety Equipment Loan program provides loans for nursing homes, skilled nursing facilities and intermediate care facilities to purchase and install fire safety equipment, primarily fire sprinkler systems.  This program has streamlined requirements that do not require all the construction documents associated with a 241(a) application.  Qualified loans may be in a first or second mortgage position.   The program is available to projects currently insured under FHA, as well as those that are not FHA-insured. | 2012-04-01 00:00:00
Do you need to list dormant entities on the Listing of Other Business Concerns schedule?  The client does not want to spend the money to have them dissolved and there is no information on the entities, no financials, etc. | OHP recommends listing the dormant entities on the Listing of Other Business Concerns schedule and in the credit investigation.  If they are dormant and have no pending judgments, actions, etc., then these entities would only be relevant insofar as they would be included in the calculation of 10% of the sponsor’s other business ventures requiring a credit report.  If all the Other Business Concerns are dormant, necessitating a recent Credit Report on a dormant entity, then including a printout of a credit report search that yielded no matches and a brief narrative explaining the dormancy and lack of financials and credit history should suffice. | 2012-04-01 00:00:00
Does OHP offer Traditional Application Processing (TAP) in the Section 232 program, if a Lender is MAP approved, but not Lean approved? | OHP does not currently have contracts in place necessary to process TAP deals and we are not able to estimate when we will.  Thus, we cannot estimate any particular timeframe within which a TAP application would be processed.  Due to this extended application timeframe, OHP would recommend working with (or becoming) a Section 232 approved Lender. | 2012-04-01 00:00:00
Under LEAN, will HUD allow site inspections to be conducted by someone other than the LEAN Lender underwriter of record for a particular transaction? | HUD will allow site inspections to be conducted by someone other than the Lender’s Lean Approved Underwriter of record for a particular transaction.  Site inspections may be conducted by any of the following individuals, as long as the site inspection report is reviewed and certified/signed by the Lender Underwriter of record:  • An Underwriter Trainee,  • Another LEAN Approved Underwriter, or • Construction site inspector (HUD pre-approval is required).    Section 232 projects adding units to the market: On Section 232 projects involving the addition of beds/units (through new construction, substantial rehabilitation, or Section 241(a)), the Lender’s Lean Approved Underwriter of record on the project must perform or certify site inspections of the subject site as well as market competitors and/or comparables from the appraisal/market study.  HUD does not require inspections of all comparables listed in the appraisal/market study – it is up to the [NAME] to determine which comparables will give them enough information to become familiar with the market. | 2012-10-01 00:00:00
Under LEAN, will HUD allow site inspections to be conducted by someone other than the LEAN Lender underwriter of record for a particular transaction? | [CONTINUED FROM ABOVE]                                                                                                                                                     Section 232/223(a)(7)s: On Section 232/223(a)(7)’s, HUD requires a site inspection on 223(a)(7) applications submitted without a new Property Capital Needs Assessment.  The inspection must be performed or certified by the Lender’s Lean Approved Underwriter of record.  An inspection may be completed by a HUD-approved construction site inspector employed by the lender as long as this individual is not connected with the loan origination.     Section 232/223(f)s: On Section 232/223(f)’s, the site inspection must be performed or certified by the Lender’s Lean Approved Underwriter of record.   An inspection may be completed by a HUD-approved construction site inspector employed by the lender as long as this individual is not connected with the loan origination. | 2012-10-01 00:00:00
What is the [NAME] and/or Minimum contingency percentage allowed on a LEAN 232 Substantial Rehab transaction? | The construction contingency reserve is included in the replacement costs of substantial rehabilitation projects.  The reserve is to be used for unforeseen costs of necessary changes and unanticipated softs costs associated with extension of change orders, as approved by HUD.  There is no minimum or maximum for [NAME].  It's an underwriting decision on a case-by-case basis. | 2013-03-01 00:00:00
If the principals of the real estate seller in a proposed purchase transaction are also the principals of the licensed operator who intend to remain the operators and lease the facility from the new owners, does this constitute an identity of interest? | ORCF has stated that owner-operators who continue to operate the facility after the sale are considered identities of interest.  However, when the transaction is clearly arms-length and at market value, ORCF may grant such sale leaseback transactions to be debt eligible prior to when the two year seasoning period has elapsed if, pursuant to the January 6, 2012 Email Blast, the lender can demonstrate that the post-transaction operator will have no interest whatsoever in the mortgagor entity.  HUD will carefully investigate the mortgage insurance request for all sale leaseback transactions | 2013-03-01 00:00:00
Where may I find current and historic data on HUD lean 232 loans? | The insured Multifamily Mortgages Database and the HUD Terminated Multifamily Mortgages Database provide a way for you to extract a list of properties that have received Section 232 NC/SR loans.  Here is a link to Multifamily Housing data reports on the HUD.gov website:  http://portal.hud.gov/hudportal/HUD?src=/program_offices/housing/comp/rpts/mfh | 2013-03-01 00:00:00
Does 232 LEAN now reference the November 23, 2011 MAP guide or is it still referencing the 2002 MAP Guide? | Until publication of the Section 232 Handbook, ORCF continues to reference the 2002 MAP Guide.  This will continue until the publication of the Section 232 Handbook.  The one exception to this is the [NAME] MAP Guide Chapter 9 Environmental Review.  The revised Chapter 9  http://www.hud.gov/offices/hsg/mfh/map/mapguide/chap09.pdf is to be used in lieu of the 2002 MAP until publication of the Section 232 Handbook. | 2013-03-01 00:00:00
When do the new Section 232 Regulations take effect? | The effective date of the Section 232 Healthcare Facility Insurance Program – Strengthening Accountability and Regulatory Revisions Update was October 9, 2012.  However, various provisions apply only to transactions for which a firm commitment has been issued by April 9, 2013  (See 232.1).  Specifically:                                                                                          The regulatory requirement that operators be single asset entities under Section 232.1003 pertains to facilities for which a firm commitment has been issued on or after April 9, 2013.  HUD’s authority to delay the loan assignment process for several months pertains to facilities for which a firm commitment has been issued on or after April 9, 2013.  The long-term debt service reserve requirement, if applicable, will only pertain to facilities for which a firm commitment has been issued on or after April 9, 2013.  The new owner surplus cash provisions will only pertain to facilities for which a firm commitment has been issued on or after April 9, 2013.  Additionally, the new financial reporting requirements apply with respect to fiscal years commencing on or after 60 days after HUD announces the manner in which such financial reports are to be submitted. (See 5.801(d)(4)). | 2013-03-01 00:00:00
Where may I find HUD Lean 232 Email Blasts? | An archive of ORCF's [NAME] can be found on our website: http://portal.hud.gov/hudportal/HUD?src=/federal_housing_administration/healthcare_facilities/section_232/lean_processing_page/underwriting_guidance_home_page | 2013-03-01 00:00:00
How can I receive HUD Lean 232 Email Blasts? | [NAME] are sent through a HUD LISTServ.  To subscribe, please visit: http://portal.hud.gov/hudportal/HUD?src=/subscribe/signup&listname=Lean%20232%20Updates&list=LEAN-232-UPDATES-L | 2013-03-01 00:00:00
Can a non-profit owner who currently has a for- profit [NAME] remain under a for-profit Regulatory Agreement under Section 223(a)(7)? | A non-profit owner who currently has a for-profit regulatory agreement will be allowed under a 223(a)(7) to be continue to be treated as a for-profit entity. | 2013-03-01 00:00:00