MARCIA RINGO, ATLANTA MULTIFAMILY HUB

1
MAP Multifamily Accelerated Processing
U.S. Department of Housing and Urban Development

• PRESENTED BY
• MARCIA RINGO, ATLANTA MULTIFAMILY HUB

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Objectives of Session
U.S. Department of Housing and Urban Development

• Understand the role of the Lenders Appraiser
  and/or Market Analyst under MAP
• Understand HUDs expectations on what information
  is needed to support the loan application
• Know the components of a complete application

3
Agenda
U.S. Department of Housing and Urban Development

• Qualifications
• Appraisal and Market Study Requirements
• Estimate of Rental Income
• Estimate of Operating Expenses
• 220 and 221d Projects
• 223f Projects
• Substantial Rehabilitation
• Ground Lease Processing Ground Rent Payments

4
Whats different for valuation?
U.S. Department of Housing and Urban Development

• HUDs review of rents and expenses completed at
  pre-application stage and follow-up review at
  firm stage
• Vacancy and collection loss no less than 5
• Phase I ESA required for all MAP programs
• Phase I ESA at pre-application stage for 220,
  221d and 232
• HUD appraiser visits site and evaluates critical
  and non-critical repairs
• Updates to appraisals (120 days or more) require
  re-inspection

5
Lenders Appraiser
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Lenders AppraiserQualifications
U.S. Department of Housing and Urban Development

• Certified General Appraiser in State where
  subject is located
• Temporary certifications are permitted but
  competency requirements still apply
• Not permissible for an appraiser who is not
  certified in the appropriate jurisdiction to have
  a locally certified appraiser co-sign the report
• Anyone acting as an assistant should be disclosed
  to the processing center
• Meet the requirements of the Competency Rule
• Have at least three years of income property
  appraisal experience (this pretty much a given if
  they are certified)
• Regularly engaged in the appraisal of multifamily
  properties

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Lenders AppraiserQualifications . . . Continued
. . .
U.S. Department of Housing and Urban Development

• Experienced in appraising multifamily properties
  similar in complexity to the subject property
• Knowledgeable concerning current real estate
  market conditions and financing trends in the
  geographic market area where the subject property
  is located
• Requirements apply to each general certified
  appraiser signing the report

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MAP AppraiserRequirements / Duties
U.S. Department of Housing and Urban Development

• Inspect the subject property
• Sign the appraisal report, including the
• MAP Certification
• The Supporting HUD Forms
• Lenders often want to bring in out-of-area or
  national experts with significant MAP experience
• However . . .
• Locational Competency is can be a problem

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Highlight and Purposeof the Appraisal
U.S. Department of Housing and Urban Development

• Evaluate the property as security for a long-term
  HUD-insured mortgage (usually 35-40 years)
• Includes estimates of
• Market Value
• Feasibility e.g. Analysis of market need,
  location, earning capacity, operating expenses
  (NOI)
• Warranted Cost of the property

10
Lenders Market AnalystQualifications
U.S. Department of Housing and Urban Development

• Each market analyst must meet the following
  minimum qualifications
• Have at least three years of experience in
  performing market analysis for income producing
  property
• Be currently active and regularly engaged in
  performing market studies for multifamily
  properties and have experience with properties of
  similar complexity
• Be knowledgeable concerning real estate market
  conditions and financing trends in the area where
  project is located

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Lenders AppraiserAppraisal Requirements
U.S. Department of Housing and Urban Development

• Each appraisal must meet the following
  requirements
• Be prepared for, paid for, and initiated by the
  Lender
• Be a complete, self-contained appraisal in
  support of conclusions made on forms completed by
  the appraiser, including
• Form HUD-92264
• HUD-92264-A
• HUD-92273
• HUD-92274

(continued)
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Lenders AppraiserAppraisal Requirements
U.S. Department of Housing and Urban Development

• For value-based programs, Section 223(f), Section
  232 and Section 232/223(f), each appraisal shall
  be a complete appraisal in accordance with all
  applicable requirements contained in USPAP
  Standards Rule 1 and in compliance with this
  guidebook.
• For Sections 220 and 221, the appraiser may
  prepare a limited appraisal as outlined in
  paragraph 7.4 A 4 of the MAP Guide.
• Adequately describe the geographic area,
  neighborhood, rental competition, sales
  comparables, site, and improvements
• Produce a fair market value, replacement cost, or
  as is value depending on type of project

(continued)
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Lenders AppraiserAppraisal Requirements
U.S. Department of Housing and Urban Development

• Have an effective date within 120 days before the
  Firm Commitment application or pre-application
  package is delivered by the Lender to HUD
• Be prepared with information provided by MAP
  Lender (Appendix 4)
• Have an appraiser certification
• The primary appraiser designated by the Lender
  and approved by HUD must perform the property
  inspection AND sign the appraisal report and the
  supporting HUD forms
• Photos of the subject, comparable sales and
  comparable rentals are required with all
  submissions.

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Lenders AppraiserAppraisal Requirements
U.S. Department of Housing and Urban Development

• Discrimination in appraising. As the basis of
  determining value, the appraiser may not
  consider,analyze, or report any information that
  makes reference to race, color, sex, handicap,
  familial status, religion, or national origin of
  the geographic area, neighborhood, occupants,
  owners or prospective owners. HUD will reject any
  Firm Commitment application for mortgage
  insurance that considers any of these issues in
  the preparation of an appraisal.
• The Discounted Cash Flow (DCF) is not a
  permissible analysis technique under MAP or TAP
  for any HUD programs

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Items the AppraiserShould have Available
U.S. Department of Housing and Urban Development

• These Will Be Submitted to HUD by Lender

• New/Sub-Rehab
• Phase 1
• Deed/Lease/Contract
• Market Study (if other)
• Sketches Layouts (Pre-App.)
• Plans Specs. (Firm)
• Cost Estimates (Firm)

• Existing Properties
• Phase 1
• Deed/Lease/Contract
• PCNA
• 3 Yrs. Financials
• Rent Roll
• 3 Yrs. Occupancy Data

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Lenders AppraiserMarket Study Requirements
U.S. Department of Housing and Urban Development

• Each market study must meet the following
  requirements
• Be prepared for, paid for, and initiated by the
  Lender
• Adequately describe
• ü the geographic boundaries
• ü general characteristics of the market area
• ü specific housing market conditions
• ü characteristics of projects under
  construction and in planning
• ü contain a demand estimate and analysis and
  estimated absorption time

(continued)
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Lenders AppraiserMarket Study Requirements
U.S. Department of Housing and Urban Development

• Each market study must meet the following
  requirements
• Have an effective date within 120 days before the
  date the pre-application is delivered by the
  Lender to HUD 232/233(f)
• Be prepared with information provided by the MAP
  Lender (Appendix 4)
• Be prepared in conformance to the market study
  format found in Appendix 7A
• Have a market analyst certification

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Lenders Appraiser220 and 221d projects
U.S. Department of Housing and Urban Development

• Estimated Rental Income
• Prepare one HUD-92273 form for each type and size
  of rental unit (if significantly different).
  Include location map and narrative supporting
  data for comparables.
• Rental comparables shall be as similar as
  possible to the subject related to
• Location
• Structural type
• Number of bedrooms
• Average unit size
• Rental adjustments are always made to the
  comparables for differences from the subject
  property

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Lenders Appraiser220 and 221d projects
U.S. Department of Housing and Urban Development

• Estimated Rental Income
• Rents as of the appraisal date or market study
  date. Rather than being trended to some future
  date, rental estimates shall be made as of the
  appraisal or market study date.
• The Lender's appraiser must establish a factor
  for vacancy and collection loss when determining
  the effective gross annual income for the
  residential units.
• The vacancy and collection loss rate used by the
  Lenders appraiser may not be less than 5 percent
  and must be adjusted upward if property and/or
  market conditions require.

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Lenders Appraiser220 and 221d projects
U.S. Department of Housing and Urban Development

• Estimated Rental Income
• This requirement applies to all programs, 221(d)
  and 223(f) under MAP.
• Where commercial facilities are included in a
  project, a separate analysis must be made of the
  effect that the commercial operation will have on
  the project. Comparable information or lease rate
  information must be submitted with the
  application.

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Lenders Appraiser220 and 221d projects
U.S. Department of Housing and Urban Development

• Operating Expense Analysis Worksheet
• HUD-92274 must be prepared for all cases
  processed
• Used for the development of project expense
  estimates for Section E of Form HUD-92264,
  Project Income Analysis and Appraisal
• Section 7.7, Operating Expense Estimates, covers
  in detail
• Sources of expense data
• Estimate of operating expenses by units of
  comparison
• Expense adjustments
• Updating procedures

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Lenders Appraiser220 and 221d projects
U.S. Department of Housing and Urban Development

• Operating Expense Analysis Worksheet
• Sources of expense data
• For new construction projects, operating expenses
  must be estimated on the basis of comparable
  projects.
• For existing projects, operating expenses must be
  estimated on the basis of comparable projects, as
  well as tested against the past 3 years of
  operating experience for the subject project.

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Lenders Appraiser220 and 221d projects
U.S. Department of Housing and Urban Development

• Operating Expense Analysis Worksheet
• Estimate of operating expenses by units of
  comparison
• Items of expense shown under each comparable and
  the expense items applicable to the subject
  proposal reflected in a suitable unit of
  comparisonsuch as expense per unit per annum
  (PUPA), The expense comparables and units
  selected must be as similar as possible to the
  subject project.

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Lenders Appraiser220 and 221d projects
U.S. Department of Housing and Urban Development

• Operating Expense Analysis Worksheet
• Expense adjustments
• Project expenses must be expressed in the same
  units of comparison in order to ensure accurate
  adjustments and correct reporting of expense
  estimates. Next, the process of correlation must
  be used to correlate the comparable expense for
  each component which is applicable to the subject
  project.

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Lenders Appraiser220 and 221d projects
U.S. Department of Housing and Urban Development

• Operating Expense Analysis Worksheet
• Updating procedures
• Expense estimates should be effective as of the
  date of the appraisal. Income and expense
  estimates must reflect the same year of
  operation.
• HUD does allow the appraiser to use an updating
  percentage to bring expense comparables up to the
  same date as the most current expense comparable
  in order to make a more creditable comparison.

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Lenders Appraiser220 and 221d projects
U.S. Department of Housing and Urban Development

• Actions
• May prepare market study (can be performed by
  Market Analyst)
• Use market comparables to
• Determine project rents
• Determine operating expenses

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Lenders Appraiser220 and 221d projects
U.S. Department of Housing and Urban Development

• Deliverables
• HUD-92013
• Location map
• Evidence of site control
• Market study with comparables
• Phase I Environmental Site Assessment (ESA) with
  a narrative environmental report. If needed, a
  Phase II Assessment should also be submitted at
  this time.
• Estimate of Market Rent by Comparison (HUD 92273)
  
• Photographs and location map of rental
  comparables used in the HUD-92273 analysis.
• Operating Expense Analysis Worksheet (HUD 92274)

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Lenders Appraiser220 and 221d projects
U.S. Department of Housing and Urban Development

• Actions
• Perform a complete appraisal establishing the
  replacement cost
• Update HUD 92273 and 92274 from pre-app stage
• Prepare sections of the Rental Housing Project
  Income Analysis and Appraisal (HUD 92264).
  Calculate
• market rents
• estimated income
• estimated total operating expenses
• total estimated replacement cost
• warranted price of the land for new
  construction
• as is value for substantial rehabilitation
• estimate of operating deficit and replacement
  reserve

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Lenders Appraiser220 and 221d projects
U.S. Department of Housing and Urban Development

• Deliverables
• HUD-92013
• Evidence of permissive zoning
• Evidence of last-arms-length transaction and
  price
• Complete, self-contained appraisal
• Rental Housing Project Income Analysis and
  Appraisal Form (HUD 92264) and Supplement to
  Project Analysis (HUD 92264A)
• Updated estimates of Market Rent by Comparison
  (HUD 92273)
• Updated operating Expense Analysis Worksheet (HUD
  92274)

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Lenders Appraiser220 and 221d projects
U.S. Department of Housing and Urban Development

• Deliverables
• Appraisers certification
• All exhibits for HUD to complete the
  Environmental Assessment and Complete Findings
  for the Related Laws (HUD-4128)
• Estimate of operating deficit and replacement
  reserve for rehab

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Lenders Appraiser223f projects
U.S. Department of Housing and Urban Development

• Actions
• Perform a complete appraisal of the property
  establishing market value
• Inspect property with Lenders Needs Assessor to
• consider eligibility of project (condition)
• check project occupancy level
• verify owners rent roll
• determine whether apartments are furnished
• Analyze property for site acceptability
• Review balance sheets and operating statements
• Determine project rents (HUD 92273)

(continued)
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Lenders Appraiser223f projects
U.S. Department of Housing and Urban Development

• Actions
• Determine project operating expenses (HUD 92274)
• Prepare sections of the Rental Housing Project
  Income Analysis and Appraisal (HUD 92264).
• Calculate
• market rents
• estimated income
• estimated total operating expenses
• total estimated replacement cost
• warranted price of the land
• fair market value of project
• estimate replacement reserve
• estimated occupancy rate

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Lender and/or Appraiser 223f projects
U.S. Department of Housing and Urban Development

• Deliverables
• HUD-92013
• Location Map
• Evidence of Permissive Zoning
• Evidence of Site Control
• Evidence of Last-Arms-Length Transaction and
  Price
• A Complete Appraisal
• Estimate of Market Rent by Comparison (HUD 92273)
• Operating Expense Analysis Worksheet (HUD 92274)
• Rental Housing Project Income Analysis and
  Appraisal (HUD 92264)

(continued)
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Lender and/or Appraiser 223f projects
U.S. Department of Housing and Urban Development

• Deliverables
• Trial Supplement to Project Analysis (HUD 92264A)
• Balance sheets and Operating Statements
• Rent Roll
• Project Capital Needs Assessment
• Appraisers Certification
• Phase I Environmental Site Assessment (ESA) with
  a narrative environment report. A Phase II
  Environmental Site Assessment must also be
  submitted, should the Phase I assessment disclose
  a need for further study.

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Substantial Rehabilitation Projects
U.S. Department of Housing and Urban Development

• Differences from New and Existing Projects
• In general. A substantial rehabilitation project
  is processed in accordance with the instructions
  found in Sections 7.9 and 7.10 of this chapter,
  except as noted below.
• 1. Supplemental HUD-92264. A supplemental
  HUD-92264 will need to be completed to estimate
  the As Is Value. The form should be titled
  Supplemental 92264 As Is Value. Both the Direct
  Sales Comparison and Income approaches to value
  are used in the value estimation.
• 2. The HUD-92273 and HUD-92274 analysis used to
  support the income and expenses on the primary
  HUD-92264 will reflect the conditions that exist
  after substantial rehabilitation has taken place.
  An estimate of replacement cost new is made on a
  worksheet (a supplementary form, HUD-92264,
  Section G) and the result is reported in Part O,
  Remarks Section of the primary HUD-92264.
• 3. A value for the land without improvements will
  need to be estimated and entered on the primary
  HUD-92264 in Section H.

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Substantial Rehabilitation Projects
U.S. Department of Housing and Urban Development

• Differences from New and Existing Projects
• "As Is" value in multifamily rehabilitation. The
  estimate of As Is value of the property before
  rehabilitation will be estimated by the direct
  market comparison approach and the income
  approach to value.
• The market value of the project is the sum of the
  land appraisal for the vacant portion of the
  subject site and the value of the existing
  property (land and improvements).
• Use the Replacement Cost by Formula, Rehab
  Projects, with or without BSPRA, found in the MAP
  Forms Book to find the total project cost
  (summation estimate) using the market value "As
  Is" of the property, and the rehabilitation cost
  estimate furnished by the cost analyst, plus
  carrying charges and financing.
• Complete HUD-92264, headed Value of the Project
  after Rehabilitation. In Section G of that form,
  the market "As Is" value of the property before
  rehabilitation will be shown on the line titled
  "As Is" value of property.

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Substantial Rehabilitation Projects
U.S. Department of Housing and Urban Development

• Differences from New and Existing Projects
• To find the project mortgage amount for Section
  220 and Section 221, use the lower of Criteria 1,
  3, 4, or 5 on HUD-92264A. Estimate the "As Is"
  value of the property before rehabilitation.
  Then, add the total for all improvements, plus
  soft costs to the AS-IS Value to obtain the sum
  of the above costs.
• Contingency reserves. For the purpose of
  provision for unanticipated costs inherent in the
  rehabilitation of older structures, there will
  normally be included in the mortgage amount a
  reserve for contingencies. This reserve is based
  on the sum of the total land improvements, total
  structures and general requirements. This percent
  may range between 0 percent and 10. This
  percentage, determined by the cost analyst, is
  included as a separate line item in the estimate
  of replacement cost on HUD-92264.

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Substantial Rehabilitation Projects
U.S. Department of Housing and Urban Development

• Differences from New and Existing Projects
• Interest during construction. For Section 220/221
  projects, interest during construction will be
  calculated based on the sum of one-half the
  mortgage amount plus one-half of the "As Is"
  value of the property, plus demolition, plus
  off-site costs.
• Inspection fee. The inspection fee is calculated
  at .5 percent of the loan amount when the project
  involves new construction. For substantial
  rehabilitation projects, the inspection fee is
  calculated as the sum of Total for All
  Improvements (plus BSPRA, if applicable), rounded
  to the next higher 100, times .5 percent.
• Offsite costs. If there are any offsite costs
  associated with the rehabilitation, enter them as
  a line item in the Estimated Replacement Cost.
  This separate entry is necessary in
  rehabilitation processing, since the "As Is"
  value does not include offsite cost requirements.
• Rehabilitation cost not attributable to
  residential use. This entry must be completed for
  all rehabilitation projects. This cost is
  prepared on Rehabilitation Cost Not Attributable
  to Residential Use, found in The MAP Book. This
  cost is transferred to line 4b under Criterion 4,
  HUD-92264A.

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Points to Remember
U.S. Department of Housing and Urban Development

• Understand what documentation is necessary to
  support an application
• Lenders appraisers are expected to be familiar
  with HUD requirements
• Appraisal must be clear as to methodology and
  reasoning, and show all data

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Lenders Appraiser220 and 221d projects
U.S. Department of Housing and Urban Development

• Ground Lease Processing
• The lease term must satisfy one of the following
  requirements
• For Section 223(f)
• Term is 99 years and renewable, or
• Term is at least 50 years beyond date mortgage is
  executed
• For Sections 220, 221(d) and 232
• Term is 99 years and is renewable, or
• Term has at least 10 years to run after maturity
  date of mortgage

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Lenders Appraiser220 and 221d projects
U.S. Department of Housing and Urban Development

• Ground Lease Processing
• Unacceptable methods of ground rent payments
• Graduated schedule of future increases on a lump
  sum year by year basis (e.g., year one 20,000,
  year two 25,000, etc.)
• Payment schedule based on COLA increases
• Increases based on future appraisals

42
Lenders Appraiser220 and 221d projects
U.S. Department of Housing and Urban Development

• Ground Lease Processing
• Acceptable methods of ground rent payments
• Fixed percentage of gross collections (or
  effective gross income) e.g. 8 of EGI
• Fixed percentage of net cash flow to equity
  (after debt service payments but before lease
  payments)
• Stated dollar amount per year to stay fixed 10
  years beyond insured term

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MAP Multifamily Accelerated Processing
U.S. Department of Housing and Urban Development
Technical TrainingEnvironmental Analysis
44
Applicable Environmental Issues
U.S. Department of Housing and Urban Development

• Lead-based paint
• Asbestos
• Historic Preservation
• Floodplain Management
• Wetlands Protection
• Endangered Species
• Noise Analysis
• Explosive/Flammable Hazards

• Coastal Barrier Resources
• Coastal Zone Management
• Sole Source Aquifers
• Airport Clear Zones
• Other Federal or State Laws
• Additional Hazards and Nuisances

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Objectives of Session
U.S. Department of Housing and Urban Development

• Understand role of environmental professionals
  and Lenders in the environmental review
• Know the applicable environmental concerns
• Understand HUDs expectations regarding MAP
  submissions
• Review application documents and exhibits

46
Agenda
U.S. Department of Housing and Urban Development

• Whats Different for Environmental Review Under
  MAP
• Professional Qualifications
• 220, 221d, and 223f Projects
• Sample Field Notes Checklist and Form HUD-4128
• Addressing Important Issues Including
• Historic Preservation
• Noise
• Floodplains and Wetlands
• Explosive/Flammable Hazards
• Lead-based Paint
• Asbestos

47
Whats different for the environmental review
under MAP?
U.S. Department of Housing and Urban Development

• Phase I ESA required for all MAP-qualified
  programs
• Phase I ESA conducted prior to pre-application
  stage for 220, 221d and 232 projects

48
EnvironmentalProfessionals Role
U.S. Department of Housing and Urban Development
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Environmental ProfessionalQualifications
U.S. Department of Housing and Urban Development

• It is up to the sponsor/developer to select the
  professionals to be used in the environmental
  review
• It is up to the Lender to verify that the
  professionals used are qualified for their
  assigned responsibilities
• Environmental professionals preparing the Phase 1
  ESA must meet the requirements set forth in the
  ASTM E-1527-05 as amended Standard Practice for
  Environmental Site Assessments Phase 1
  Environmental Site Assessment Process

(continued)
50
Environmental ProfessionalQualifications
U.S. Department of Housing and Urban Development

• Other professionals may be required to evaluate
  technical areas, such as toxic chemicals or soil
  conditions
• The Lender should assure itself that these
  technicians are qualified
• When these professionals are required, the Lender
  may contract for those services if the
  sponsor/developer has not done so

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Environmental Professional220 and 221d projects
U.S. Department of Housing and Urban Development

• Actions
• Conduct Phase I Environmental Site Assessment
  (ESA)
• Identify any Recognized Environmental Concerns
  (REC)
• Conduct Phase II ESA if Phase I is inconclusive

Pre-application Stage
52
Environmental Professional220 and 221d projects
U.S. Department of Housing and Urban Development

• Phase I (ESA) includes
• Review of current and historical records
• Interviews with people knowledgeable of the site
• Inspection of buildings, grounds, and adjacent
  properties
• Report on details of data investigation,
  reporting process, and an opinion of the datas
  accuracy

Pre-application Stage
53
Environmental Professional220 and 221d projects
U.S. Department of Housing and Urban Development

• Actions
• Determine that all RECs are or can be resolved
• Update reports from pre-application

Firm Commitment Stage
If ESA Reports submitted at Pre-application are...
dated more than 180 days from the date of
submission of the firm commitment
must be updated no later than 150 days past the
expiration of the original
Then they...
within 60 days of submission of firm commitment
And...
180
150
60
Days Before and After Submission of Firm
Commitment
54
Environmental Professional223f projects
U.S. Department of Housing and Urban Development

• Actions
• Conduct Phase I Environmental Site Assessment
  (ESA)
• Identify any RECs
• Conduct Phase II ESA if Phase I is inconclusive

55
U.S. Department of Housing and Urban Development
Lenders Role220 and 221d projects

• Actions
• Consult with HUD staff regarding any
  environmental concerns
• Submit completed Phase I ESA
• Submit a narrative environmental report Use
  HUD-4128 and the sample field notes checklist as
  a guide

Pre-application Stage
(continued)
56
U.S. Department of Housing and Urban Development
Lenders Role220 and 221d projects
Pre-application Stage

• Actions
• Demonstrate that REC from the Phase I ESA are or
  can be resolved
• Verify that
• Historic preservation issues resolved
• Project not located in a high noise zone
• Property not located in 100-year floodplain

57
Lenders RoleNarrative Environmental Report
U.S. Department of Housing and Urban Development

• The Sample Field Notes Checklist is meant to
  provide a generalized outline of typical
  questions for environmental review in the
  narrative environmental report
• The checklist should identify any environmental
  issues to be resolved
• This narrative report will help HUD staff
  complete Form HUD-4128, Environmental Assessment
  and Compliance Findings for Related Laws
• HUD and the Lender should reach agreement at
  pre-app with regard to the measures taken to
  resolve issues

58
Resolve Issues at Pre-application Stage
U.S. Department of Housing and Urban Development

• In addition to issues regarding site
  contamination, important issues that usually must
  be resolved at the pre-application review
  include those related to
• Historic Preservation
• Noise
• Floodplains and Wetlands
• Explosive/Flammable Hazards

59
Resolve Issues at Pre-application Stage
U.S. Department of Housing and Urban Development

• HISTORIC PRESERVATION
• ALL applications for HUD mortgage insurance are
  considered federal undertakings which require
  HUD to make a determination of
• no effect,
• no adverse effect, or
• adverse effect upon historic properties

(continued)
60
Resolve Issues at Pre-application Stage
U.S. Department of Housing and Urban Development

• HISTORIC PRESERVATION
• Lenders should notify the State Historic
  Preservation Officer (SHPO) when submitting
  exhibits for pre-application review or earlier
• If a problem is expected, it should be discussed
  with Hub or Program Center
• The response from the SHPO must be received
  before a commitment is issued
• HUD must make a determination and finding
  regarding historic preservation before firm
  commitment can be issued

61
Resolve Issues at Pre-application Stage
U.S. Department of Housing and Urban Development

• NOISE
• If the project is located near a major noise
  source, a noise assessment will be required for
  new construction. Possibilities include
• Civil airports (within 5 miles)
• Military airfields (within 15 miles)
• Major highways and busy roads (within 1000 feet)
• Railroads (within 3000 feet)
• Facilities generating loud or repetitive noises
  (factories, quarries, trucking terminals, etc.)

(continued)
62
Resolve Issues at Pre-application Stage
U.S. Department of Housing and Urban Development

• NOISE
• HUD standards regarding the acceptability of
  noise impacts on residential property are found
  at 24 CFR Part 51
• For new construction and conversion from
  non-residential to residential projects, these
  standards must be met
• For rehabilitation and refinancing, noise
  exposure by itself will not result in rejection
  of existing properties for insurance, but will be
  considered as a marketability factor

63

U.S. Department of Housing and Urban Development
HUDs 8-step decision-making process for
Floodplains and Wetlands

• 1. Is the site in a floodplain?
• 2. Serve public notice
• 3. Review alternatives accept project as
  submitted, accept with modifications as
  dictated by HUD, or reject.
• 4. Consider impacts
• 5. Consider mitigation of impacts
• 6. Reconsider alternatives
• 7. Serve 2nd public notice with decision to
  proceed
• 8. Approval of firm commitment

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Resolve Issues at Pre-application Stage
U.S. Department of Housing and Urban Development

• FLOODPLAINS
• If any part of the site or integral offsite
  development is located within the 100-year
  floodplain according to the applicable FEMA map,
  this should be discussed with HUD at the
  pre-application stage
• New construction in mapped 100-year floodplains
  is strongly discouraged
• Proposed rehabilitation, refinancing, or new
  construction for facilities housing or serving
  mobility-impaired individuals in mapped 500-year
  floodplains is strongly discouraged

(continued)
65
Resolve Issues at Pre-application Stage
U.S. Department of Housing and Urban Development

• FLOODPLAINS
• Any existing building accepted for mortgage
  insurance which is located within a FEMA mapped
  floodplain is required to carry flood insurance
• In the amount of the loan
• For the term of the loan
• Subject to available maximum coverage
• ALL leases must contain acknowledgements signed
  by tenants indicating that they have been advised
  that
• The property is in the floodplain, and
• Flood insurance is available for their personal
  property

66
Resolve Issues at Pre-application Stage
U.S. Department of Housing and Urban Development

• WETLANDS
• Applications for mortgage insurance on new
  construction are subject to Executive Order
  11990, Protection of Wetlands
• Wetlands are those identified on the National
  Wetland Inventory maintained by the U.S. Fish and
  Wildlife Service
• Proposals impacting wetlands must be reviewed by
  HUD
• Wetlands under local or state jurisdiction are
  subject to state or local review as appropriate

67
Resolve Issues at Pre-application Stage
U.S. Department of Housing and Urban Development

• EXPLOSIVE/FLAMMABLE HAZARDS
• HUD will not insure a property where structures
  and residents will be exposed to unacceptable
  risks posed by proximity to explosive or
  flammable hazards.
• There must be an Acceptable Separation Distance
  (ASD) away from aboveground storage facilities
  with explosive or flammable material contents and
  similar industrial facilities
• Analysis of sites near or in the vicinity of
  these types of facilities must be performed by
  HUD

68
U.S. Department of Housing and Urban Development
Lenders Role220 and 221d projects

• Actions
• Demonstrate that all RECs have been (or can be)
  resolved
• If necessary, develop maintenance plans for any
  asbestos and/or lead-based paint problems
• Report any changes or updates to pre-application
  environmental information

Firm Commitment Stage
69
U.S. Department of Housing and Urban Development
Lenders Role223f projects

• Actions
• Consult with HUD staff regarding any
  environmental concerns
• Submit Phase I ESA
• Submit narrative environmental report
• Demonstrate that all RECs have been or can be
  resolved

Firm Commitment Stage

70
Lead-based Paint and Asbestos
U.S. Department of Housing and Urban Development

• Topics not covered in the SFNC or Form HUD-4128
  include
• Lead-based paint (may be present in buildings
  built prior to 1978)
• Asbestos (may be present in buildings built prior
  to 1976)
• These topics must be addressed by the sponsors
  architect
• All structures with lead-based paint and asbestos
  need an Operations Maintenance Plan

71
Lead-based Paint and Asbestos
U.S. Department of Housing and Urban Development

• LEAD-BASED PAINTS
• Lead based paint requirements
• Are relevant to conversion, substantial
  rehabilitation, and to refinancing or purchase of
  apartments under Section 223(f)
• Are not applicable to rehabilitation,
  refinancing, or purchase of healthcare facilities
• All HUD regulations have been updated. Copies of
  the new regulation, with guidance materials, may
  be downloaded from www.hud.gov/lead or obtained
  by phoning 1-800-424-LEAD

72
Lead-based Paint and Asbestos
U.S. Department of Housing and Urban Development

• ASBESTOS
• If there is asbestos and it is friable, HUD
  recommends that it be removed
• If asbestos is not friable or damaged, it is
  usually acceptable for encapsulation
• This course of containment will require and
  Operations and Management plan

73
Environmental AnalysisMore Information
U.S. Department of Housing and Urban Development

• All Federal agencies are required to comply with
  the National Environmental Policy Act of 1969.
  HUD regulations implementing NEPA are contained
  in 24 CFR, Part 50. HUD may not delegate its
  environmental responsibilities to others.
• HUD has issued two handbooks covering
  environmental issues Handbook 1390.2
  Environmental Assessment Guide for Housing
  Projects and Handbook 1390.4 Guide to HUD
  Environmental Criteria and Standards contained in
  24 CFR 51.
• HUD has established an environmental form,
  HUD-4128, that documents compliance with NEPA,
  and other environmental Federal laws,
  authorities, Executive Orders, and HUD standards.
  HUD-4128, Environmental Assessment and
  Compliance Finding for Related Laws is in the
  Forms Appendix.

74
Environmental AnalysisMore Information
U.S. Department of Housing and Urban Development

• The Forms Appendix also contains the Sample Field
  Notes Checklist which the HUD staff will use to
  provide information supporting the conclusions
  listed on Form HUD-4128. Existing projects do not
  require an environmental assessment under the
  National Environmental Policy Act but do need to
  comply with Part A requirements of Form HUD-4128.
  Rehabilitation projects that meet the condition
  of 24 CFR 50.20(a)(2) also do not require an
  environmental assessment under NEPA except in
  extraordinary circumstances. (Still need a Phase
  I)
• This chapter is not a substitute for requirements
  in the laws, regulations, and Executive Orders
  regarding environmental analysis.

75
Environmental AnalysisMore Information
U.S. Department of Housing and Urban Development

• MAP Guide is available on the HUD web site
• www.hud.gov/fha/mfh/map/maphome.html
• Questions?
• FAQs on web site

76
Points To Remember
U.S. Department of Housing and Urban Development

• HUD cannot give up its environmental regulatory
  responsibilities (HUD-4128)
• The Sample Field Notes Checklist should be used
  as a guide for the narrative report
• Informal communication with HUD staff concerning
  environmental requirements is encouraged