Date: March 23, 2010
After a two-year process involving two rounds of comments by industry stakeholders, on Monday, May 2, HUD published new closing documents for the FHA Multifamily Insured Loan Program (76 FR 24363). The proposal was initially released on January 21, 2010. On December 21, 2010, the Department issued a second notice seeking final comments on its proposed changes.
The revised documents reflect extensive changes. Among the many changes, some key modifications include: expanding the definition of an eligible borrower to allow a non-single-asset entity in certain conditions; requiring additional borrower liability; and creating a two-tiered default structure. Member firms who use FHA financing are encouraged to review the revised documents. Firms with applications under consideration by FHA should consult with their legal counsel.
The final documents, as well as redlined versions showing changes made, are available on HUD’s Multifamily Closing Documents web site.
NMHC, as part of a broad coalition, shared detailed comments and worked closely with HUD’s legal counsel regarding the proposed changes. Our comments cited our concerns with HUD's proposal to retain some limited recourse liability for principals that commit certain “bad boy” acts. We also oppose a proposed expansion in the definition of project funds that fails to recognize the distinction between project funds properly under control of HUD and other funds that may be in the possession of the borrower.