The Federal Housing Administration has released their new version of the Multifamily Accelerated Processing guide better known as MAP centered on improving the time it takes to process.
The new guides combine all of the multifamily program changes along with guidance such as FAQ, mortgagee letters, and notices all in one document. This information was at times hard for lenders to collect and even staff members at HUD had trouble finding. The guide will also provide precise clarity around affordable housing transactions, which is an area that has been neglected in other versions or guides.
In theory, the time it takes to process could improve via using the new guide due to the fact that lenders and HUD staff will not have to spend as much time debating on what is allowed along with saving time on research. On the other hand, do not expect this to be a fast answer to the problem as the business that has flooded in over the last year still has to be gone through which will take some time.
Phil Melton, managing director at New York–based MAP lender Centerline Capital Group stated, “The long-term effect of the MAP changes will be really beneficial,” and went on to say, “But you still have a short-term issue that’s going to take some time to play itself out. You still have to get through the current logjam.”
Turn around times are seeing improvements, however, they are still not quick. A new construction loan via a Sec. 221(d) (4) program can still take up to a year, while a refinance or acquisition loan via a Sec. 223(f) program can take between seven to nine months.
Of course, the timeline will vary according to the program as well as the HUD office you are using. A few offices such as the one in Columbus, Ohio states their turn around for Sec. 223(f) applications is 60 days.
This can be confusing once again as the definition of days was also changed in the new guide. The agency now guarantees a pre-application review of 45 days for Sec. 221(d) (4) loans with another 45-day review of the firm commitment application. Prior to this new guide, calendar days were used but now they are measured in business days, which make the time line longer.
Even with these days outlined in the new guide, the idea is of course the best practice but they are not reality.
Ed Tellings, FHA chief underwriter at Columbus, Ohio–based MAP lender Red Mortgage Capital stated, “To be honest, I don’t think many offices at this point, given their staffing and resources, can meet the time frames that are established,” and went on to say, “It’s a little better now than it was six months ago, and that has a lot to do with HUD getting through that volume of business they received last September.”
The current loans being processed are from last September. The loan changes by the FHA were changed in July of 2001 to make them less generous for market-rate deals while debt service coverage went up, and leverage went down. The deals were sent prior to September 1, 2010, which was placed in under the previous generous terms, which buried the agency in more paperwork and of course more volume.
What this did was cause the FHA to become a victim of their own guidelines. During the last fiscal year, the FHA processed a record $10.4 billion in multifamily deals, which surpassed in August, with more than a month left to go in the 2011 fiscal year.
The capital markets are improving and more lending options are slowly becoming available, several borrowers still think waiting on FHA is the best way to go. Sec. 221(d) (4) deals are quoted under 5 percent, which is an awesome rate for a 40-year, non-recourse money that can go up to 83.3 percent leverage on market-rate deals. While a Sec. 223(f) deal for a refinance or acquisition are currently being quoted in the low–4 percent range.
The FHA has made other improvements to keep it all moving. The FHA will refund the fee for an application that has not been gotten to yet while some of its overwhelmed offices, like in San Francisco, are sending their workload to less-overwhelmed offices, like Phoenix, Arizona. The FHA also overhauled its loan closing a document that has not been done in the last 20 years, regulating underwriting and narrative templates and streamlining the process.
Lenders are delighted with how the new MAP guide turned out and congratulate the HUD multifamily team, in particular Chris Tawa, Dan Sullivan, and Janet Golrick, for delivering on their promise.
Tellings stated, “By providing clear guidance, it should allow people to move quicker on those issues where HUD offices and lenders get hung up,” and went on to say, “HUD’s done a really good job of taking a lot of questions and issues and putting them all in one place.”