Following NMHC/NAA’s repeated calls to streamline the FHA’s loan processing procedures, FHA issued new guidance (Notice H-2011-35) to its lenders on December 29, 2011, to expedite loan processing and deal with its backlog of applications.

The new procedures took effect immediately and apply to mortgage insurance applications for new construction (Section 221(d)(4) program), refinances of existing FHA multifamily loans (Section 223(a)(7) program) and refinances of non-FHA multifamily loans (Section 223(f) program). 

Among other things, they expedite the processing of loans under $25 million by allowing approval at the field of Hub offices, increase unit and dollar thresholds for loans requiring central committee approval and improve transparency for borrowers with new reports indicating the status of borrowers’ applications.

While NMHC/NAA are pleased with the improvements, there is still concern that the loan thresholds may limit the measure’s effectiveness given the volume of loan applications that exceed $25 million.  HUD national loan committee reviewed 240 loans in 2011, but with the new changes, HUD hopes to cut that number by over one-third in 2012 to between 120 and 160 loans.  NMHC/NAA continue to press HUD to delegate more loan approvals to field and Hub offices during 2012.  Specifically, we have asked the Department to remove the unit thresholds, noting that property size has little bearing on credit risk. 

NMHC/NAA met with HUD Secretary Shaun Donovan on March 14 to discuss these and other FHA-related issues.   This is the fourth meeting that NMHC/NAA, along with the Mortgage Bankers Association (MBA) and the National Association of Home Builders (NAHB) Multifamily Group, have initiated with the Secretary in the past 14 months.

For more background on the issue, see www.nmhc.org/goto/FHAMultifamily.