The new closing documents must be used for mortgages that receive a firm commitment from HUD on or after September 1, 2011.  (Borrowers can request to use the older closing documents after September 1 if the FHA Commissioner agrees that using the new ones would cause financial hardship.)

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.