LEAN 232 Email Blasts

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Email Blasts by Date

2025

January | March

2024

2023

January 2025

January 7, 2025

Handbook 4232.1 Rev-2 Draft Revisions Posted On ORCF Policy Drafting Table

- The Office of Residential Care Facilities posted draft edits of Handbook 4232.1 REV-2 on July 1, 2022. Since then, taking into account extensive industry input, ORCF has reviewed and considered areas that require further clarification or updates to reflect current program policy. As a result, ORCF is considering further revisions to the Handbook that are now posted in draft form on ORCF’s Policy Drafting Table. ORCF invites all industry partners to provide voluntary feedback by no later than March 7, 2025. Industry feedback has been a critical component to ORCF’s administration of the Section 232 program to date. ORCF will assess all feedback received on this revised draft as it progresses to a final update. To submit voluntary feedback, please follow the instructions on ORCF’s Policy Drafting Table.

Please note, the draft revisions posted on ORCF’s Policy Drafting Table are not final. The draft changes may or may not be included in the final update.

Keywords: Handbook 4232.1 Draft Revisions

March 2025

March 3, 2025

Update On Assignee for HUD Environmental Review Online System (Heros)

The third-party consultants can assign the HEROS review to ORCF at the time of, or shortly before, the application’s submission to HUD. Upon approval by the lender, the consultant should submit the HEROS review to ORCF by using the “Assign Review” feature and selecting Mike Luke as the assignee. Please do not contact Mike Luke regarding HEROS; his name is only used to store the HEROS submissions until an environmental reviewer is assigned to the project. Questions regarding HEROS should be submitted to LeanThinking@hud.gov.

Keywords: Environmental, HEROS

Closing Corner

Closing Documents to be Signed? PLEASE READ FIRST!

As a reminder and stated in ORCF’s October 31, 2018 Email Blast, ORCF Closing Coordinator and HUD Attorney first need to approve the final draft documents and agree they are ready for ORCF signature before closing documents can be sent to ORCF for signature. The ORCF Closing Coordinator will then send the Lender and Lender Attorney an email with detailed instructions for delivering the documents to the designated signatory. Documents must not be sent for ORCF signature without prior, expressed approval from the ORCF Closing Coordinator. Please note that documents will be returned if received prior to expressed approval from the ORCF Closing Coordinator.

Keywords: Closings, Signing Closing Documents

Reminder: Elimination of Hard Copies of Closing Documents Post-Endorsement

Per ORCF’s May 09,2022 Email Blast, submission of hard copies of the executed documents are no longer required provided that no changes were made to the document submission that was provided electronically to HUD. Please see April 6, 2022 Memorandum for further details.

Keywords: Closings, Post-Closing Documents

February 2024

February 28, 2024

Electronic Closing Protocols

Effective for all projects with Firm Commitments issued on or after March 4, 2024, HUD has updated our Electronic Closing Protocols. These protocols can be found here.

For ORCF projects, the Lender must submit electronic copies of the fully executed and otherwise collected closing documents to ORCF and the HUD closing attorney in accordance with HUD protocols. Following closing, the Lender must upload a complete closing transcript of all closing and recorded documents into the Section 232 HUD Healthcare Portal in the order of the HUD Attorney Checklist. This upload should include an executed post-closing certificate confirming there have been no changes to the documents since the release of the endorsed note. The sample certification is available here.

To the extent the Borrower and/or Lender have delivered documents to HUD in an electronic format and/or signed using digital signature software or other electronic means, consistent with Program Obligations and the FHA Lender Initial Approval Certification, any electronic signatures must conform to meet applicable legal, information technology, and administrative requirements, including:

the Electronic Signatures in Global and National Commerce Act (the “E-SIGN Act”) as codified at 15 U.S.C. § 7001 et seq;
the Uniform Electronic Transactions Act (or similar legislation adopted at the state level as in effect in the project’s jurisdiction); and
prevailing industry standards governing the use of electronic records and signatures in the closing of commercial real estate loans.

Keywords: Closing

Reminder - Standard Flood Hazard Determination and Life-Of-Loan Monitoring Requirement

As previously outlined in ORCF’s April 28, 2021 Email Blast, a Flood Insurance Determination with “life-of-loan” monitoring is required for every Mortgage Loan in the Section 232 program. The Lender must obtain flood-zone determinations from a qualified third-party flood-zone determination firm with confirmation of “life-of-loan” monitoring. The third-party firm must determine whether any of the Property improvements are in a Special Flood Hazard Area (SFHA) and must document each determination on a Standard Flood Hazard Determination Form (SFHDF) issued by FEMA (FEMA Form 086-0-32).

The Lender must submit the completed SFHDF as an exhibit with the mortgage insurance application and must place a copy of the SFHDF in the Lender Servicing File for the Mortgage Loan. “Life-of-loan” coverage must be indicated on the SFHDF.

Life-of-loan monitoring and coverage means that the monitoring company will notify the Lender if and when flood insurance is required for a monitored Property. This is required for every Mortgage Loan in the Section 232 Program, regardless of the initial determination, because conditions and the status of a zone may change over time. The Lender must ensure that the monitoring company it selects agrees to continue monitoring for all the covered properties in the event that the Lender sells or otherwise transfers its servicing rights to another Mortgage Loan servicer.

The continuation of this “life-of-loan” monitoring and coverage becomes a loan servicing requirement which continues during the entire life of the mortgage and survives a change in Loan Servicer. Should the flood-zone status change during the life of the Mortgage, Lenders are required to evaluate the flood insurance requirement as a result of the change and enforce the requirements for flood insurance, if applicable, due to the new information.

These requirements are covered under the Lender’s Certification for Insurance Coverage (Form HUD-92435-ORCF). For more information, see ORCF’s Handbook 4232.1, Section II, Chapter 14.7.H.

Keywords: Flood Insurance Requirements, Floodplain, Insurance, Environmental

Lender Narrative and Personally Identifiable Information (PII)

As a reminder, the collection of Personally Identifiable Information (PII) is governed by Office of Management and Budget (OMB) guidelines. For instance, although certain Participant Social Security Numbers (SSNs) are required as part of the certification process, they should not routinely be included in the body of the Lender Narrative nor in organizational charts when not specifically required.

Please reach out to your assigned Account Executive or LeanThinking@hud.gov should you have further questions.

Keywords: Application Processing, Organizational Charts, Change of Participants, Consolidated Certifications

April 2024

April 24, 2024

ALTA 2021 Title Loan Policies Administrative Memorandum

HUD published an Administrative Memorandum on March 8, 2024 providing guidance on the adoption of the American Land Title Association (ALTA) 2021 series. Please see the Administrative Memorandum for more details.

Keywords: ALTA Title Policy

Office Of Residential Care Facilities (ORCF) NSPIRE Update

As has long been the case, the Borrower/Operator must complete the Certification of Exigent Health and Safety Issues (HUD-93332-ORCF). This form must be uploaded in NSPIRE (link referenced below), along with documentation establishing mitigation as required by 24 CFR 5.711(c). Some key reminders regarding NSPIRE requirements:

Life Threatening and Severe deficiencies must be mitigated in the NSPIRE system within the following time frames:
24 hours to correct the deficiencies; and
48 hours after correction to provide evidence of correction to HUD via the NSPIRE system.

Per 24 CFR 5.711(c) - the owner or PHA or owner's representative must electronically certify and provide supporting evidence within 2 business days after the deadline to correct the Life-Threatening and Severe items that the items have been resolved or sufficiently corrected such that they no longer pose a severe health or safety risk to residents of the property, or that the hazard is blocked until permanent repairs can be completed. If permanent repair will take longer than the allowable time in the relevant standard for the deficiency, the owner or PHA must provide HUD a time frame for completing permanent repairs for HUD approval.

Moderate and low deficiencies must be corrected within 30- 60 days. Please see your Health and Safety Report for time frames.
Per the Post-Report Inspection provision at § 5.711(c)(2) - HUD is removing the requirement that owners or PHAs provide electronic evidence of correction of Moderate deficiencies as HUD believes, after considering comments, the burden both of reporting and processing this evidence would outweigh the benefit.
Paragraph (c)(1) continues to require evidence that Severe deficiencies have been corrected be provided to HUD within established time frames. HUD is also adding a requirement that properties which score below a 60 must complete a full self-inspection of the entire project, including all units, inside areas, and outside areas, for any deficiency and electronically submit a copy of the results to HUD and not the limited self-inspection described in this regulation for identified deficiencies in units and areas of the property not inspected by REAC. This addition is necessary to ensure that owners and PHAs survey 100 percent of their properties when they have poor physical performance (i.e., scores below 60) to identify additional health and safety defects in the units that were not part of the inspection sample. PHAs and owners that conduct a full inspection after the HUD inspection can consider this inspection to satisfy the requirements of § 5.707 for that year.
HUD has also amended § 5.711(c)(1) to clarify the timeline for the correction of health or safety deficiencies. The timeline for correcting LT and Severe health or safety deficiencies remains 24 hours after the inspection. The timeline for repairing Moderate and Low deficiencies has been revised from ‘‘expeditiously’’ to ‘‘within 30 days’’ for Moderate deficiencies and “within 60 days” for Low deficiencies, consistent with HUD’s intent as stated in the preamble of the Proposed Rule. HUD can authorize permanent repair timelines that exceed 30 days if the deficiency cannot be permanently repaired in 30 days.

Example of where to attach the EH&S certification

Projects with a Failing Score

ORCF-Projects with a Single, Non-Consecutive, NSPIRE Inspection Score of 31 to 59: ORCF will send out a Notice of Violation (NOV) of the Regulatory Agreement(s) to the Borrower and Operator, as applicable. Accordingly, the Borrower shall take the following corrective action within sixty (60) days after the date of this Notice:

Conduct a survey of the entire Project, identifying all physical deficiencies.
Correct all physical deficiencies at the Project, including but not limited to, those identified in the NSPIRE inspection and those identified in the Borrower’s survey of the entire Project.
Upload the executed Certification of Physical Condition Compliance (HUD-93333-ORCF) into NSPIRE.
Upload the executed Certification of Physical Condition Compliance (HUD-93333-ORCF) not NSPIRE in the Notes and Attachment section.

Further Guidance

If a property owner/agent (POA) cannot submit evidence of the correction within established time frames due to an issue with the NSPIRE system, they should email a copy of the certification and evidence to the Office of Residential Care Facilities (ORCF) at 232Reac@hud.gov

ORCF property owners and agents can access the NSPIRE system here: https://hud.my.site.com/NSPIRE/s/. Any remaining healthcare property owners who haven’t logged in were emailed the NSPIRE system “Welcome Message” with their login information so they can access the system. If you still are having issues logging on or experiencing a technical issue with the NSPIRE system, please contact the Office of Real Estate Assessment Center (PIH-REAC) Technical Assistance Center by email at reactac@hud.gov, or by phone at 1-888-245-4860, Monday through Friday, 7 a.m. - 8:30 p.m. ET.

Resources Available:
The NSPIRE Administrative Notice includes guidance on submitting evidence of correction, and what HUD may deem acceptable for deficiencies that cannot be permanently corrected within 24 hours.

Properties should access the resources available on the NSPIRE Toolkit website for guidance on how to log into the system and submit evidence of mitigation. The page includes:

Toolkit as a PDF for PHA and property owners

Who to Contact:
If you have questions about the NSPIRE process, contact 232REAC@hud.gov. If you are experiencing a technical issue with the NSPIRE system, please contact the Office of Real Estate Assessment Center (PIH-REAC) Technical Assistance Center by email at reactac@hud.gov, or by phone at 1-888-245-4860, Monday through Friday, 7 a.m. - 8:30 p.m. ET.

Keywords: NSPIRE

Closing Corner

Update Regarding Placing of Monuments and Survey Waivers

ORCF will no longer entertain requests for survey waivers for the placing of monuments as described in Table A, item 1. Should you have any questions, please contact your assigned ORCF Closing Coordinator.

Keywords: Survey, Monuments, Table A

REMINDER – “Cut-off Date” and 232 Cost Certification Packages

As a reminder, per Handbook 4232.1, Section II, Chapter 11.7 and 11.9, the construction final completion date is the effective date for the cost certification. However, the Borrower has the option to include in the cost certification all soft costs incurred up to sixty (60) days beyond such date. The date selected by the Borrower is the “cut-off date” for all soft costs.

The submission date for the cost certification to be submitted to HUD should be within 60 days after the Borrower’s selected cut-off date.

Please contact your assigned ORCF Closing Coordinator if you have any questions.

Keywords: Cut-off Date, Cost Certification, Construction Final Completion

June 2024

June 26, 2024

Discussion and Analysis of Staffing in The Lender Narrative and Appraisal

Due to the new Centers for Medicare & Medicaid Services (CMS) rule and ongoing changes in the industry and environment, we are amending the language related to staffing in the October 27, 2021 Email Blast to read as follows:

ORCF expects an analysis of staffing in every application. The following items need to be addressed in the lender narrative – with items 1 through 4 also addressed in the appraisal.

Is the project currently using agency staffing, and if so, what are the trends and the financial impact of such?
Do the underwritten expenses allow for anticipated increases in staffing expenses?
Analyze how expenses will be impacted by projected changes in occupancy and wage growth.
CMS has issued a rule that establishes minimum staffing standards for long-term care facilities (here). What is the expected impact of this rule on the project?
How has the facility handled any increases in staffing and other expenses?
Is there sufficient staffing available in the market to continue to staff the project at the proposed occupancy level?
If there is a shortage of staffing, what is the anticipated impact to the Medicare.gov star rating(s) – or quality of care on projects not rated using the Medicare.gov star rating system?
If the project currently has a 1 Star Medicare.gov Staffing rating, explain why this rating is a 1 Star, and what the facility is doing to improve this rating (including addressing the ability to hire additional staff or use contract services, as needed).

This anticipated analysis is not a new requirement but is an application of existing requirements to the new CMS rule and pervasive staffing shortages currently being experienced in the residential care industry. The analysis is part of the normal underwriting due diligence encompassed within the Lender Narrative (particularly the Key Questions contained therein) and Handbook 4232.1, Section II, Chapter 5.3.R.4.

Keywords: Staffing, Appraisals, Lender Narrative

Clarifying Guidance on Changes in Collateral Transactions and Environmental Reviews

The following is clarification on the environmental requirements for the various types of Change in Collateral transactions that fall under the “Change in Land” category. For additional guidance on environmental requirements for these transaction types, please see Handbook 4232.1, Section III, Chapter 3.4.3 and 3.4.4.

Easements (Public): Occasionally, municipalities, public utilities, or other city officials request owners to grant easements or right-of-way for construction of sewers, power lines, or for other purposes. For these transactions, a Phase I Environmental Site Assessment (ESA) is not required. Instead, in its role as the releasing office, ORCF will conduct an environmental review internally. For these types of land changes, Lenders must submit the Capital Improvements and Requests to Release or Modify Original Loan Collateral Checklist but do not have to submit the Phase I ESA from the Environmental Requirements section.
Easements (Private): For these transactions, a Phase I Environmental Site Assessment (ESA) is not required. Instead, in its role as the releasing office, ORCF will conduct an environmental review internally. For these types of land changes, Lenders must submit the Capital Improvements and Requests to Release or Modify Original Loan Collateral Checklist but do not have to submit the Phase I ESA from the Environmental Requirements section.
Eminent Domain: Occasionally, government entities may enforce eminent domain. Environmental reviews are not required for these types of requests. Lenders must submit the Capital Improvements and Requests to Release or Modify Original Loan Collateral Checklist and include evidence of the public eminent domain request in the submission. Lenders may skip the Environmental Requirements section of this checklist when submitting Eminent Domain requests.
Partial Releases/Dispositions/Sale of land: For these transactions, a Phase I Environmental Site Assessment (ESA) is not required unless the receiving property is subject to HUD’s rules and regulations, which may require a Phase 1 ESA. Instead, in its role as the releasing office, ORCF will conduct an environmental review internally. For these types of land changes, Lenders must submit the Capital Improvements and Requests to Release or Modify Original Loan Collateral Checklist but do not have to submit the Phase I ESA from the Environmental Requirements section.

Keywords: Environmental, Partial Releases, Easements, Change in Collateral

New Workload Manager in ORCF Production

Abby Hugill has been selected to be a Workload Manager in Production. We have moved underwriters to Abby’s team to balance the workload between Abby, Jennifer Tadlock, and Rachel Coleman. Please refer to the Underwriter Contact Sheet posted on ORCF’s Production website to see the makeup of ORCF’s Production teams and contact information for underwriters and Workload Managers.

Keywords: Workload Manager

August 2024

August 28, 2024

Implementation of New Federal Flood Risk Management Standard Final Rule for Section 232 Programs

HUD published a final rule to implement the Federal Flood Risk Management Standard (FFRMS) on April 23, 2024. The final rule updates 24 CFR Part 55 to redefine the floodplain of concern, increase the required elevation for new construction and substantial improvement activities, strengthen public notice requirements, clarify flood insurance requirements, and incorporate limited flexibilities in allowing HUD assistance in floodways for certain HUD-projects when certain criteria are met.

The rule went into effect on May 23, 2024 and the compliance date is June 24, 2024 for most HUD programs. However, the Office of Residential Care Facilities has an optional extended compliance date through January 1, 2025 where HUD and applicants may elect to follow the previous version of the regulations. The previous version of 24 CFR Part 55 can be found here. While ORCF encourages all projects to follow the new Part 55 requirements immediately, the optional extended compliance period covers the Section 232 program.

It is noted that the January 1, 2025, extended compliance deadline in the FFRMS final rule is tied to a completed floodplain management review, not to an application date.

Section 223(f) Projects: The new regulation applies to any 223(f) projects where the environmental review is completed after January 1, 2025.
New Construction, Substantial Rehabilitation and 241(a): For New Construction, Substantial Rehabilitation and 241(a) projects, any environmental reviews completed after January 1, 2025, will need to follow the new regulation including the updated language when posting public notices. When completing the 8 step notices required by the regulation, lenders should seek ORCF’s approval of the language and location of the posting prior to posting the public notices. Lenders considering submitting an application for a project located in the FFRMS floodplain between now and January 1, 2025, should consult with Leanthinking@hud.gov prior to application submission.

The following resources regarding the new regulation are available to lenders:

FFRMS Final Rule Webinar Series: Part 200 Overview, Protection of Wetlands, Flood Insurance, and Notifications – June 2024 - HUD Exchange

Projects in the 100 Year Floodplain

Lenders are reminded that HUD Handbook 4232.1, Production, Chapter 7.5.C.9 states that for Section 223(f) projects HUD will evaluate risks and mitigation measures in making its decision but it discourages these actions if either the lowest floor, or the life support facilities, or egress and ingress of the existing building, are below the 100-year floodplain line.

Lenders with projects in the 100-year floodplain should address the following:

Elevation of the of the mechanical, electrical, generator, elevator mechanical equipment, residential units, medical storage, food preparation, food service, food storage, ingress/egress
Ability of staff and emergency personnel to enter and exit the building during a flood to deliver necessary supplies, resident care and to evacuate residents.
Information about any previous flooding at the project

Appropriate mitigation measures vary based on the specific project, so lenders should submit proposed mitigation measures to Lean Thinking ahead of application submission in the event that the project is an unacceptable flood risk and/or to avoid significant delays in application processing.

Radon Testing Standards:

ANSI/AARST MA-MFLB-2023 consolidates ANSI/AARST MAMF (rev. 1/21) and ANSI/AARST MALB (rev. 1/21) into a single publication and supersedes both documents. Therefore ANSI/AARST MA-MFLB-2023 is considered the “most recent edition” and must be followed moving forward, in accordance with the handbook requirement that radon testing must follow ANSI/AARST MALB-2014, or the most recent edition.

Keywords: Federal Flood Risk Management Standards (FFRMS)

Reminder on Chop Submissions to Make Organizational Charts Readily Understandable

As a reminder, CHOP submissions need to follow HUD Notice 2016-15,Processing Guide for Previous Participation Reviews of Prospective Multifamily Housing and Healthcare Programs' Participants. The notice states, "The organization chart must be clear enough so that a person unfamiliar with the Covered Project and the entities involved can understand the ownership and control structure." While the Controlling Participants must be identified in the Lender Narrative, if they are also identified in the Organizational Charts, this can be very helpful. Additionally, per the ML, each specified capacity (e.g., Borrower, Master Tenant) must be shown on a separate organization chart rather than including all in one document.

Further, the 3-year experience requirement for participants needs to be clearly illustrated in CHOP submission materials.

Keywords: Asset Management, Change of Participants, Operator and Management Agent Analysis, Organizational Charts, Lender Narrative

Annual Financial Statement Submissions and Mid-Year Computations of Surplus Cash

Borrowers and Lenders need to be mindful of the requirements for the submission of the Mid-Year Computation of Surplus Cash as part of the annual financial statement submissions to HUD.

Borrower Regulatory Agreements dated August 2013 or later contain a requirement for the inclusion of the Mid-year Computation of Surplus Cash Schedule as part of the owner’s Audited Financial Statement filing package. This requirement is based on the regulatory provisions at 24 CFR 232.254.

HUD’s Real Estate Assessment Center (REAC) will archive financial statements that fail to adhere to HUD and ORCF requirements including any required Mid-Year Computation of Surplus Cash. Once archived, the financial statements will no longer be accessible in iREMS. Borrowers will then need to resubmit the financial statements.

Keywords: Asset Management, Financial Assessment Subsystem (FASSSUB), Financial Statements, Financials, Submission of Borrower

232 Healthcare Portal Naming Convention

Some Portal users may have noticed issues uploading their documents into the Portal without having to rename them. It was discovered that this was due to changes Microsoft recently made pertaining to the allowance of certain special characters within document names. We have updated the Firm Application and Closing Naming Convention files on HUD.gov to reflect these changes. Please update your documents accordingly to reflect these changes, and do not use the following characters in your file names: Less than: (<), Greater than: (>), Colon: (:), Double quote: ("), Forward slash: (/), Backslash: (\), Vertical bar or pipe: (|), Question mark: (?), Asterisk: (*). Additionally, if copying and pasting the file names from a document, please make sure to use a Microsoft Excel or Microsoft Word document and not a PDF document.

Keywords: 232 Healthcare Portal

Closing Corner

Updated HUD Initial Closing Checklist Section 232/241(a) Now Available

In coordination with OGC, the HUD Initial Closing Checklist for the Section 232/241(a) program has been updated and is now available - OGC_ClosingChecklist_241a.pdf (hud.gov). This checklist is specifically for the Initial Closing of Section 241(a) projects and includes links to Section 241(a) program specific documents. For your convenience, it can be found on the ORCF Webpage – Section 241(a) page - ORCF: 241a Documents | HUD.gov / U.S. Department of Housing and Urban Development (HUD)

Should you have any questions, please reach out to the assigned ORCF Closing Coordinator or assigned HUD Attorney.

Keywords: Section 241(a), Initial Closing, Checklist

September 2024

September 5, 2024

Webinar Presentation on HUD’s 232 Program: Updates in Production and Asset Management– September 17, 2024, 2:00 P.M. Eastern Time

In a webinar hosted by the American Health Care Association/National Center for Assisted Living (AHCA/NCAL), HUD’s Office of Residential Care Facilities (ORCF) will provide a brief overview of the Section 232 program and will cover a range of topics related to HUD’s Residential Care Facility Mortgage Insurance Program. The webinar will run from 2:00 p.m. to approximately 3:00 p.m. Eastern Time on September 17, 2024, and will be open to AHCA/NCAL members and non-members. The webinar will be recorded. There is no charge for participation.

Presentation topics will include:

Section 232 Program Overview
Numbers/trends on application volume, timing, and underwriting issues of note
Section 232 Green MIP Transactions: Borrowers’ Post-Closing Responsibilities
Improving Data Quality in the Portal
REAC NSPIRE physical inspections
HUD-required Action Plans

Speakers:

John Hartung, Director, Policy, Risk Analysis and Lender Relations Division, Office of Residential Care Facilities, HUD
Tim Gruenes, Director, Production Division, Office of Residential Care Facilities, HUD
Philip Head, Director, Asset Management Division, Office of Residential Care Facilities, HUD
Angela Collier, Deputy Director, Asset Management Division, Office of Residential Care Facilities, HUD

Event Date: September 17, 2024, 2:00 p.m. - 3:00 p.m. (Eastern Time)

Although membership to AHCA/NCAL is not required to participate in the webinar, you will still need to create an AHCA/NCAL username and password to register for the webinar.

How to Register for AHCA/NCAL webinar:

Webinar participants will need to login using their existing ahcancalED username and password first.
Once you are logged in to the website you will be able to register for the webinar by clicking the green register button at the top of the page.
If you have forgotten your password click here.

How to Register for an AHCA/NCAL username and password:

To avoid technical problems, use Google Chrome.
If you are new to the site, you can create an account here. After creating an account, you will be able to register for the webinar. If you need further assistance with creating an AHCA/NCAL account, please email educate@ahca.org

Keywords: Webinar

October 2024

October 17, 2024

Upcoming Webinars on the Federal Flood Risk Management Standard (FFRMS): Defining the FFRMS Floodplain

HUD published a Final Rule implementing the Federal Flood Risk Management Standard (FFRMS) in April 2024. Details, guidance and two overview webinars can be found here. HUD’s Office of Housing is offering two new webinars specifically for Housing Partners on defining the Federal Flood Risk Management Standard (FFRMS) floodplain. Please register and join us!

Defining FFRMS for Housing Partners Part 1
Overview of how to define the FFRMS floodplain using the Climate Informed Science Approach (CISA), 0.2 percent annual chance floodplain, and Freeboard Value Approach methods for Housing programs including Multifamily, Healthcare, and Hospital FHA (including Risk-Sharing), RAD, GRRP and Asset Management.
October 21, 2024, 2pm-3:30pm ET.
Defining FFRMS for Housing Partners Part 2
Defining FFRMS floodplain for areas behind levees and other unique floodplain areas; determining the required elevation; and using Flood Insurance Study data for Housing programs including Multifamily, Healthcare and Hospital FHA (including Risk-Sharing), RAD, GRRP and Asset Management.
November 4, 2024, 2pm-3:30pm ET.

Keywords: Federal Flood Risk Management Standards (FFRMS), Webinar

October 21, 2024

Corporate Credit Reviews and Mortgage Reserve Fund Requirements

HUD would like to remind lenders that Mortgagee Letter 2024-03, includes the requirement for a Mortgage Reserve Fund (MRF) on large portfolios. ORCF allows a limited number of applications for projects that are part of a portfolio to be submitted and processed while a Corporate Credit Review (CCR) is being completed. HUD will add a special condition for a MRF if a CCR is pending. ORCF would also like to remind lenders that a “portfolio” is defined as all related projects, not just those above a CCR threshold, and thus all applications in a portfolio with a CCR will be required to include a MRF. Existing closed projects are exempt from the MRF as loan terms cannot be modified on previously closed loans.

LARGE PORTFOLIO SIZE CLASSIFICATIONS FOR FISCAL YEAR 2025
Effective 10/1/2024, and in accordance with Mortgagee Letter 2024-03, the Large Portfolio size classifications are as follows:

Large Portfolio Size Classification

% of UPB

Fiscal Year 2025 Amount

Operator

0.6%

$205,000,000

Owner Only

1.0%

$342,000,000

Requires ORM Review

2.0%

$684,000,000

Program Maximum

5.0%

$1,708,000,000

Keywords: Portfolios

New Workload Manager in ORCF Production

Holly (Beal) Drake has been selected to be a Workload Manager in Production. We have moved underwriters to Holly’s team to balance the workload between the Production Workload Managers. Please refer to the Underwriter Contact Sheet posted on ORCF’s Production website to see the composition of ORCF’s Production teams and contact information for underwriters and Workload Managers.

Keywords: Workload Manager

Settlement Agreement in Massachusetts Impacts Some Section 232 Skilled Nursing Facility Applications

As some of you may be aware, a recent legal settlement in the State of Massachusetts related to the Olmstead decision has the potential to significantly impact the underwriting of nursing homes. As part of this Settlement Agreement, the State has committed to transition at least 2,400 adults with disabilities from nursing homes to community settings, over the next eight years. Thus, this shift does not simply involve attrition but rather proactive steps to relocate existing SNF residents. This will involve very extensive efforts on the state’s part that include Community Transition Liaison Program weekly meetings at each SNF to provide “in-reach,” informed choice, and transition planning assistance; meeting with nursing home residents (even those who do not express a desire to move); provision of additional Waiver slots; provision of additional rental subsidies; and provision of home modifications to support transitions, etc.

The 2,400 figure represents over 7% of the existing SNF residents in the State, and a significantly higher percentage of Medicaid-assisted SNF residents. Moreover, while the Settlement Agreement does address special efforts to transition residents having behavioral disabilities, the transition effort is not limited to such individuals.

In addressing the Lender Narrative Risk Factors Section Key Question 6, you will need to evaluate the potential impact of the State’s transition efforts on the facility and propose appropriate mitigants. Given the State’s commitment to transition 7% of current SNF residents within eight years, we would expect a SNF applicant to demonstrate the ability to sustain a loss of residents due to this initiative over that eight-year period. Moreover, given that a high proportion of the transitioning residents may be non-traditional SNF residents, some special use facilities would be expected to demonstrate a capacity to sustain an even greater loss of occupancy resulting from this state initiative. In evaluating this risk, you will want to consider the following matters, among others:

The percentage of residents who are long-term residents.
The long-term position of the project in the market, including obsolescence and reputation.
The occupancy census sensitivity and Medicaid census sensitivity.
The percentage of residents who are aged under 62.
- Adequacy of 10-year Reserve Schedule
- Proposed change to R4R amount
- ADA compliance
- Status of Critical Repair/Non-Critical Repairs, including
  - Confirmation documentation as to repairs completed, and
  - A plan, including timeline, for the uncompleted repairs

The application should contain mitigants (e.g., low LTV, DSCR significantly exceeding program minimums) as needed to ensure that the facility can sustain the potential impact of this Massachusetts state initiative.

Pointing to nursing home residents’ clinical eligibility for nursing facility services is an insufficient response, since such eligibility does not establish ineligibility for transitions to a community setting. In fact, a condition for eligibility for a Home and Community Based Services (HCBS) Waivers under MassHealth programs is that the individual would meet the state’s eligibility requirements for services in an institutional setting.

This anticipated analysis is not a new requirement but is an application of existing requirements to the actions being taken by the State of Massachusetts. The analysis is part of the normal underwriting due diligence encompassed within the Lender Narrative (particularly the Key Questions contained therein) and Handbook 4232.1, Section II, Chapter 2.5.3 and Chapter 5.3.R.4.

Further information about the Massachusetts settlement is available at Marsters, et al v. Healey, et al – Center for Public Representation.

Keywords: State Risk, State Risk Summary Grid

NSPIRE Technical Review Guidance and Step-By-Step Instructions on How to Submit Appeals and Close Out Deficiencies

HUD has received feedback that Property Owner/Agent (Borrowers/Operators) have been experiencing issues when submitting appeals in the NSPIRE IT system. To address this, HUD has made Technical Review Guidance available that provides a summary of the basis for technical review along with instructions for how to submit an appeal.

As a reminder, if a Property Owner/Agent (Borrower/Operator) believes that a property's inspection results and score should be reviewed due to verifiable reasons, they may request a technical review. They should submit the request electronically through the NSPIRE system within 45 calendar days following the date by which HUD provides the inspection report.

A request for a technical review must be accompanied by evidence supporting the claim. HUD recommends seeking a technical review only if the correction will result in a significant improvement in the overall score of the property, such as an increase to 60 or above or a change in the inspection frequency.

Additionally, there is updated guidance to Closing out the deficiencies on the NSPIRE Toolkit website.

Please email HUD at NSPIRE@hud.gov, or call the Technical Assistance Center (TAC) at 1-888-245-4860, with any questions.

Keywords: Asset Management, NSPIRE, Physical Inspections (REAC)

Updated Lender Guidance for 10-Year Project Capital Needs Assessment Submissions

In its ongoing asset management role, the lender concerns itself with many facets of a project including its physical condition. One tool that the lender must obtain, analyze and utilize in that respect is the Physical Condition and Needs Assessment (PCNA). As 232 Lenders are aware, the PCNA is to ensure the long-term viability of the project, in part by ensuring the proper deposit to the Reserve for Replacement for Capital Items and Major Moveable Equipment.

Every ten years, the lender must obtain and submit to ORCF a PCNA, including the lender’s analysis. To assist lenders in doing this, Asset Management anticipates posting in November on our Section 232 website here a 10-Year PCNA checklist with items to consider when submitting the PCNA and analysis.

A thorough lender’s PCNA analysis will address in detail the following:

In the event the lender includes a HUD 9250 requesting to decrease the R4R deposit, the request must include a detailed analysis and justification.

Keywords: PCNA

November 2024

November 14, 2024

Clarification on Allowable Repairs as Necessary Costs of Refinancing in a Section 232/223(F) Transaction

OHP is working on guidance that will clarify the appropriate implementation of the statutory language “necessary costs of refinancing” under Section 223(f)(4) of the National Housing Act.

In the interim, Lenders may only include in a Section 232/223(f) refinancing application requests to mortgage the cost of repairs that are necessary to comply with requirements related to life, health, and safety of occupants (e.g., installation of smoke detectors and radon mitigation measures), environmental requirements, associated issuance of permits, and/or federal, state and local regulatory requirements.

This standard applies to all 223(f) applications received on or after November 12, 2024.

Keywords: 223(f)

December 2024

December 5, 2024

Upcoming Webinar on the Federal Flood Risk Management Standard (FFRMS): Defining the FFRMS Floodplain Part 3

December 17, 2024 | 2:00 – 3:30 PM ET

Join the upcoming webinar, Defining the FFRMS Floodplain Part 3, on December 17, 2024 from 2:00 – 3:30 pm ET. This is the third webinar covering FFRMS, since HUD published a Final Rule implementing the Federal Flood Risk Management Standard in April 2024.

The training is designed for Housing Programs including Multifamily, Healthcare and Hospital FHA (including Risk-Sharing), Rental Assistance Demonstration (RAD), Green and Resilient Retrofit Program (GRRP), and Asset Management. The webinar will address the following:

Defining elevation in Coastal AE zones;
Calculating costs and structural value for substantial improvements;
Example 8-step and notification language;
Considering sites with floodways under 55.8; and
Alternate processing for nonconforming sites via 55.21.

For your reference, please review the first two webinars in the Defining the FFRMS Floodplain series and an overview of additional details and guidance on FFRMS here.

Keywords: Federal Flood Risk Management Standards (FFRMS), Webinar

February 2023

February 3, 2023

Section 232 Healthcare Facility Documents Renewed (OMB 2502-0605 - Comprehensive Listing of Transactional Documents for Mortgagors, Mortgagees and Contractors) – Including Green Mortgage Insurance Premium (MIP) Documents

The Section 232 Healthcare Facility documents (OMB 2502-0605 - Comprehensive Listing of Transactional Documents for Mortgagors, Mortgagees and Contractors) have been renewed. The documents have been published on HUD's Client Information Policy Systems (HUDCLIPS). Minor changes were made to OMB 2502-0605 as detailed in the November 12, 2021 60-Day Notice of Proposed Information Collection. Documents with Green Mortgage Insurance (MIP) initiative related edits were detailed in the August 26, 2022 30-Day Notice of Proposed Information Collection. The Office of Residential Care Facilities is allowing a transition period until May 1, 2023. During this transition time, old documents can still be used, however, please see the following details:

Production: All new Firm Commitment application documents will be required for Firm applications submitted on or after May 1. If an applicant chooses to use new Firm Commitment application documents before that date, then the applicant must also use new closing documents, regardless of closing date. Additionally, all new closing documents must be used for any project that receives a Firm Commitment on or after May 1.

Asset Management: All Asset Management transactions must use new documents on or after May 1.

Green MIP: The following fifteen documents have edits related to the Section 232 Green Mortgage Insurance Premium (MIP) initiative. These documents must be used for all Green MIP transactions:

HUD-9001-ORCF - Lender Narrative - 223a7

HUD-9002-ORCF - Lender Narrative 223f

HUD-9003-ORCF - Lender Narrative 241a

HUD-9004-ORCF - Lender Narrative - New Construction - Single Stage

HUD-9005-ORCF - Lender Narrative - New Construction - 2 Stage - Initial Submittal

HUD-9005a-ORCF - Lender Narrative - New Construction - 2 Stage Final Submittal

HUD-9006-ORCF - Lender Narrative - Substantial Rehabilitation - Single Stage

HUD-9007-ORCF - Lender Narrative - Substantial Rehabilitation - 2 Stage Initial Submittal

HUD-9007a-ORCF - Lender Narrative - Substantial Rehabilitation - 2 Stage Final Submittal

HUD-90013-ORCF - Consolidated Certification – Borrower

HUD-91124-ORCF - Design Architect Certification

HUD-92464-ORCF - Request Approval Advance of Escrow Funds

HUD-92466-ORCF - Healthcare Regulatory Agreement – Borrower

HUD-92467-ORCF - Supplemental Healthcare Regulatory Agreement – Borrower

HUD-92476-ORCF - Escrow Agreement Noncritical Deferred Repairs

Keywords: Section 232 Documents, Green MIP

Adoption of New Phase I Environmental Site Assessment Standard, ASTM E1527-21

ASTM, Inc., published a new standard for Phase I Environmental Site Assessments (ESAs) titled ASTM E1527-21 on November 2, 2021. On December 15, 2022, the Environmental Protection Agency (EPA) published a final rule to amend its All Appropriate Inquiries (AAI) rule at 40 CFR 312.11 to reference the new standard as sufficient to satisfy the requirements of the rule, with an effective date of February 13th, 2023. The EPA rule also established a sunset period through February 13, 2024, for the ASTM E 1527-13 standard.

Handbook 4232.1, Section II, Chapter 7.3.A.1.b requires use of the most recent edition of industry standards for compliance with environmental laws and regulations. For the ASTM E1527 standard, HUD requires the most recent standard that EPA has adopted and referenced in the AAI rule. Although the EPA has established an effective date of February 13th, 2023, the final rule states that EPA determined the ASTM E1527-21 standard to be compliant with the requirements of the All Appropriate Inquiries rule. Therefore, Section 232 applications submitted after the EPA final rule’s publication on December 15, 2022 and prior to February 14, 2024 may use either ASTM 1527-21 or ASTM 1527-13.

Applications submitted prior to February 14, 2024 that included a Phase I ESA using E1527-13 and that met time frame requirements at Section 7.3.A.1.c. in Handbook 4232.1 Rev-1, Section II will not have to submit a new Phase I ESA to conform with the new standard.

For new applications after February 13, 2024, all Phase I ESAs must conform to ASTM E1527-21.

Keywords: Phase I, Environmental, ASTM E1527

Extension Of Authorization to Lenders and Their Representatives to Initiate Consultation with State Historic Preservation Offices (SHPOS)

On March 18, 2021, HUD issued a formal authorization under 36 CFR 800.2(c)(4) for lenders and their authorized representatives using specific FHA Multifamily or Healthcare programs to initiate and carry out Section 106 consultation under certain conditions. This authorization was optional, and lenders could choose to follow the Memorandum or request HUD staff to continue to initiate consultation. HUD has tracked its use and found that a majority of FHA applications that require Section 106 SHPO consultation have used the authorization.

Based on its extensive use and positive feedback from users, HUD has decided to extend the authorization for 5 years with minor edits. Edits include the following:

Extend authorization for 5 years and update HUD staff contacts.
Synthesize the memo by removing confusing and unnecessary content that does not apply to the authorization.
At the request of the Advisory Council on Historic Preservation, add direct reference to implementation language in the MAP Guide, Chapter 9 and the Section 232 Handbook, Section II, Chapter 7.
Add and clarify specific details about how HUD staff consult with Tribes and consider tribal input.
Clarify that this does not constitute a full delegation and that HUD staff complete the Section 106 review and make the final determination.

It is important to note that this authorization does not extend to consultation with Tribes. HUD staff will maintain the critical responsibility and relationship in consulting with Tribal Historic Preservation Officers (THPOs) and Tribes. Lenders should continue to submit early Tribal consultation requests to ORCF via LeanThinking@hud.gov when a project requires Tribal consultation, such as when ground disturbance is proposed. When the results of HUD’s Section 106 Tribal consultation are needed prior to initiating SHPO consultation, lenders and their consultants should follow the process described in the June 29, 2022 Email Blast. If the lender and its consultant do not believe the receipt of Tribal responses is necessary prior to initiating SHPO consultation based on their research at the site, they may initiate consultation with the SHPO prior to receiving the Tribal responses, and HUD will ensure all Tribal comments are incorporated into the Section 106 process.

In addition, although HUD is authorizing lenders and their authorized representatives to initiate consultation with the SHPO and non-tribal consulting parties, the Section 106 review is not complete until HUD staff independently review and certify the sufficiency and appropriateness of the Section 106 processes performed and the documentation provided in HUD’s Environmental Review Online System (HEROS).

Effective January 1, 2023, the Department extends the authorization to Multifamily Accelerated Processing (MAP)- and Office of Healthcare Program (OHP)-approved lenders and their authorized representatives to act on behalf of HUD to initiate the Section 106 review process with SHPOs and other consulting parties except for Tribes, to identify and evaluate historic properties, and to assess effects. The updated Memorandum is available on the ORCF Environmental Resources website.

Lenders and their consultants must follow the Memorandum’s requirements, including sending a copy of the Memorandum when corresponding with the SHPOs. Consultants must also research and follow specific SHPO protocols, which vary from state to state.

Keywords: State Historic Preservation Office (SHPO), Environmental

February 22, 2023

Flood Preparedness Documentation for Excepted Projects

In accordance with Handbook 4232.1, Section II, Chapter 7.5.C.14, flood preparedness documentation is required for all Section 232 applications when the project is located in a 100-year or 500-year floodplain on an effective, preliminary or pending Federal Emergency Management Agency (FEMA) Flood Insurance Rate Map. This requirement includes projects that propose to use the “incidental portion” exception at 24 CFR 55.12(c)(7), due to their location in a 100-year and/or 500-year floodplain.

As a reminder, projects proposing to use the “incidental portion” exception require a permanent covenant that will encumber the property in perpetuity and outlast the insured mortgage.

The following documentation must be included in the mortgage insurance application for any projects located in a 100-year or 500-year floodplain, including those invoking the “incidental portion” exception:

Evidence of participation in an early warning system
Indicate the specific method(s) used to monitor weather conditions and flooding alerts (e.g., National Oceanic and Atmospheric Administration weather radio continuously monitored by staff and an emergency alert agreement with the state or municipal emergency services agency.)
Emergency evacuation and relocation plan
Include names and addresses of like facilities (i.e., similar residential healthcare facilities) that have agreements or contracts with the project to serve as temporary relocation sites for the subject’s residents. Provide the flood zone designations of relocation sites outside of the 500-year floodplain.
Identification of evacuation route(s) out of the 500-year floodplain
Include evacuation routes to temporary relocation sites identified in Paragraph 2.

Keywords: Environmental, Flood, Evacuation

ORCF New Protocol on Obtaining Section 232/242 Regulatory Agreement Releases Effective March 1, 2023

Office of Residential Care Facilities (ORCF) seeks to enhance efficiency in program operations and reduce costs while maintaining FHA’s core program oversight functions. To better serve our industry partners, ORCF has implemented an electronic mailing system for releases of Section 232 and 242 FHA Regulatory Agreements.

All requests for releases of Regulatory Agreements for Nursing Homes, Board and Care Facilities, Assisted-Living Facilities (Section 232), and Hospitals (Section 242) must be sent to the 232RegReleases@hud.gov for processing.

ORCF will release the regulatory agreement once the mortgage insurance is terminated. Insurance termination occurs after the FHA-insured mortgage has been paid in full The release request should be submitted only after: (A) the loan is paid in full and (B) FHA has terminated the mortgage insurance.

All inquiries, status updates, and additional submissions of information should be directed to 232RegReleases@hud.gov.

Documents Needed to Prepare the Release

For FHA Healthcare projects, each request for the release of an FHA-insured regulatory agreement must include:

The FHA Project Name and Number in the Subject Line (XYZ Nursing Home FHA No. 000-12345). Only one project per email, please.
A copy of the recorded regulatory agreement(s) (including any amendments). Please ensure that the recordation stamp(s), dates, and signatures are legible.
Title report, policy, or commitment.
Submitter’s contact information to include email address and a mailing address for the hard copy releases to be sent.
Written confirmation of FHA mortgage insurance termination. If submitting a form HUD-9807, Termination of Multifamily Insurance as evidence, the bottom “For HUD Use Only” section must reflect the cancellation of the FHA insurance endorsement and be signed by a designated FHA Official. Please note a form HUD-9807 without HUD’s signature and the ORCF Prepayment Memorandum are not acceptable evidence of mortgage insurance termination. Please see Sample Insurance Termination Cover Letter and Sample Evidence of MFIOB Termination Letter on the Section 232 Loan Servicing website.

Failure to follow these instructions will result in delays—resubmissions are treated as new requests. Please note processing typically takes up to eight (8) weeks following receipt of all necessary documents by FHA.

HUD-Held Mortgages/Deeds of Trust - All requests for the satisfaction of HUD-held mortgages/deeds of trust (including Mark-to-Market), UCC terminations, and releases of associated regulatory agreements must be sent to the Multifamily Notes Servicing Branch in HUD Headquarters at MultifamilyNotesServicingBranch@hud.gov.

Keywords: Asset Management

April 2023

April 26, 2023

New Decision Circuit

The Office of Residential Care Facilities (ORCF) has been testing a new version of the Decision Circuit (DC), a tool used in appraisal review and underwriting. This version is essentially a data transfer device. The fundamental difference between the new and former DC is that instead of entering the data in the various worksheets, all the data will be put into one of two worksheets, “Appraisal Inputs” and “Lender Inputs”. The skeleton of the inputs is protected so the form can’t change significantly and the location of entries can’t move. We’ve included the traditional charts and tables used in Lender Narratives.

To facilitate faster reviews, lenders typically fill the DC out for us as part of their application package. This is not a requirement as the DC is not a published form. Because data can easily be transferred, lenders can use it with any suite of worksheets desired. The new DC can be found online here. ORCF welcomes comments.

Keywords: Decision Circuit, Appraisal Review

Proposed Rule: Floodplain Management and Protection of Wetlands – 24 CFR Part 55

On March 24, 2023, HUD announced the publication of the Notice of Proposed Rulemaking (NPRM) for the proposed rule Floodplain Management and Protection of Wetlands; Minimum Property Standards for Flood Hazard Exposure; Building to the Federal Flood Risk Management Standard , and the associated opening of the public comment period through May 23, 2023. With this NPRM, HUD takes a major step in addressing future flood risk and ensuring the safety of HUD-assisted residents and federal investments.

The proposed rule implements the Federal Flood Risk Management Standard (FFRMS). The FFRMS addresses requirements of Executive Order (E.O.) 13690, Establishing a Federal Flood Risk Management Standard and a Process for Further Soliciting and Considering Stakeholder Input.

HUD’s proposed rule affects projects receiving HUD assistance, financing, or mortgage insurance. The FFRMS floodplain expands the 1-percent-annual-chance (100-year) floodplain both vertically (based on projections of increased flood height) and horizontally (to reflect the vertical increase depending on the topography of a site). The proposed rule establishes that, when possible, a Climate Informed Science Approach (CISA) should be used to determine the FFRMS floodplain, utilizing the best-available, actionable hydrologic and hydraulic data. Where this data is unavailable, the rule provides for alternate approaches to determine the FFRMS floodplain based on the best available data/information. HUD also anticipates that over time, additional data will increase the capability of a CISA application nationwide.

The proposed rule requires that newly constructed or substantially improved structures within the FFRMS floodplain be elevated or, for certain non-critical actions, floodproofed to the FFRMS floodplain elevation. This proposed rule expands the applicability of the longstanding 8-step process to areas based on both current and anticipated future flood risk.

Interested parties are encouraged to submit any comments they have on the proposed rule. More information about the proposed rule, as well as answers to frequently asked questions, can be found on the proposed rules webpage found here. Information on how and where to submit comments can be found in the Federal Register notice announcing the draft policy and comment period at this link.

Additionally, HUD will be hosting live listening sessions where interested members of the public and stakeholder groups may provide comments on May 2nd and May 15th. Each session will be hosted from 3:00-4:30 PM EST. Registration information for the sessions can be found at the links below. All content presented across all sessions will remain the same; however, to maximize attendance we encourage your participation at the appropriate session. The purpose of the listening sessions is to seek individual opinions of the participants, and not a request for participants to come to a consensus.

FFRMS Listening Session 2 – Federally Recognized Tribes, Native Hawaiian Organizations, and Alaskan Native Attendees- Registration Link (May 2, 2023)
FFRMS Listening Session 3 – Open Public Forum - Registration Link (May 15, 2023)

Keywords: Floodplain, Flood, Wetlands, FFRMS

Cash Flow Stress Test No Longer Required

The Cash Flow Stress Test has been a very useful tool during the COVID Pandemic. However, in light of the fact that COVID-19 National Emergency is expiring on May 11, 2023, ORCF has determined that the stress test with monthly financial metrics will no longer be required. We do, however, continue to expect the lender to include the Lender Narrative Appendix, which requires the lender to address a number of COVID-related impacts, including potential staffing impacts.

Keywords: Cash Flow Stress Test

June 2023

June 28, 2023

NSPIRE Final Rule

HUD published the National Standards for the Physical Inspection of Real Estate (NSPIRE) Final Rule in the Federal Register on May 11, 2023. The Final Rule makes changes to inspections, including:

New Self-Inspection Requirement and Report. Owners will be required to conduct self-inspections of all units at least annually and correct all identified deficiencies.
Timeline for Deficiency Correction. HUD clarifies the timeline for the correction of health or safety deficiencies. For life-threatening and severe deficiencies, the Owner must correct the deficiency within 24 hours after the inspection report is received, and upload evidence of that correction within 72 hours to HUD.
Resident Involvement HUD will allow residents to make recommendations regarding units to be inspected and to receive copies of inspection results.

The implementation date is October 1, 2023 for properties participating in the Section 232 program.

The REAC team is developing training for you. This will include a combination of PowerPoint presentations, infographics and instructional videos that will be posted on the NSPIRE website. For more information about the changes under the Final Rule, read the full rule.

Keywords: Asset Management, Physical Inspections, REAC

Healthcare Portal – File Name Issue

ORCF has identified an issue with uploading documents into the Healthcare Portal when a Microsoft Office document (i.e. Word, Excel, PDF) file name contains a "long dash” (–). File names that contain a long dash may not successfully upload to the Portal. When a space is entered before and after a dash in the name of a Microsoft document or PDF, it changes the dash from a "short" dash (-) to a "long" dash (–),To successfully upload of documents into the Portal, please DO NOT USE SPACES BEFORE AND AFTER ANY DASHES in the file name.

The document name below is an example of a "long" dash (located between "Receipt" and "FHA Application"):

1-1.A_PAYMENT RECEIPT – FHA APPLICATION FEE.PDF

If your file names have dashes like this, please verify if they are "short" dashes or "long" dashes, and change them to only be “short” dashes, without spaces between the dash and the words before and after, such as the file name below:

1-1.A_PAYMENT RECEIPT-FHA APPLICATION FEE.PDF

Making these changes should allow the user to upload the document without issue.

Keywords: 232 Healthcare Portal

Lean Thinking Integrating into FHA Resource Center

Lean Thinking has long been a go-to source for general and nuanced questions regarding ORCF policies and requirements. ORCF seeks continuous improvement, and opportunities to improve Lean Thinking as a tool are certainly important. One such opportunity is by integrating Lean Thinking into the existing FHA Resource Center, which is being expanded as a customer service resource for multiple FHA programs. In the coming months, Lean Thinking will be working with the FHA Resource Center to provide the industry with a seamless, integrated process in timely responding to your inquiries. ORCF Policy staff and various ORCF subject matter experts will continue to be involved. Please be on the lookout in the near future for further details.

Keywords: Lean Thinking

From The Closing Corner

Lender’s Pre-Construction Conference Agenda (New Construction/Substantial Rehabilitation/241(a)) Updated to Include Requirements for the Green MIP Program

Mortgagee Letter 2022-13 “Green Mortgage Insurance Premium (MIP) Program Guidance for the Office of Health Care Facilities (ORCF)” was published on August 18, 2022. For all New Construction, Substantial Rehabilitation and 241(a) Projects where Borrowers intend to participate in the Green MIP Program, Lenders must present the requirements outlined in Pre-Construction Conference Agenda and Mortgagee Letter 2022-13 (ML 2022-13) at the Pre-Construction Conference. Lender’s Pre-Construction Conference Agenda may be found under “HUD Tools for Firm Commitment Applications” for each of New Construction, Substantial Rehabilitation and 241(a) project types in HUD’s Office of Residential Care Facilities Section 232 Underwriting Guidance. For further details, please see the ML 2022-13.

Keywords – Pre-Construction Conference, Pre-Construction Conference Agenda, Green Mortgage Insurance Premium (MIP)

August 2023

August 30, 2023

Non-Profit Project Audited Financial Statement Submissions - Important Information for Borrowers and Auditors

It has come to our attention that some audited financial statements submitted for non-profit owned ORCF projects have been using the incorrect Assistance Listing Number (ALN) when filing audited financial statements to the Federal Audit Clearinghouse (FAC). Note that the acronym ALN has just recently replaced the more commonly known Code of Federal Domestic Assistance (CFDA) number.

The correct ALN for all ORCF projects is 14.129. For example, a Section 232 pursuant to Section 223(f) would use the Section 232 ALN of 14.129, not the MFH ALN for 223(f)s.

Non-profit owners with unpaid principal balances over $750,000 are subject to the Single Audit Act (SAA). For more information about SAA filing requirements, see 2 CFR, subpart F. While filing audited Financial Statements through REAC FASS satisfies ORCF program guidance, audited financial statements for auditees subject to the SAA must also be filed to the Federal Audit Clearinghouse. For more information about filing SAA audited financial statements through REAC and the Federal Audit Clearinghouse, please see the current Federal Audit Clearinghouse website: Federal Audit Clearinghouse - Home (census.gov)

As noted on this website, the Federal Audit Clearinghouse now requires filers to use an Unique Entity Identifier (UEI) in lieu of an EIN. You can find more information about the UEI on the FAC FAQ page here: Federal Audit Clearinghouse - FAQs (census.gov)

Please reach out to your assigned Account Executive should you have further questions or LeanThinking@hud.gov.

Keywords: Asset Management, Financial Statements, Non-Profit Entities

Notice H-2023-07 -- Implementation of National Standards for the Physical Inspection Of Real Estate (NSPIRE) Administrative Procedures- Applicability to ORCF Projects

The Implementation of National Standards for the Physical Inspection of Real Estate (NSPIRE) Administrative Procedures Notice (H-2023-7) covers the process and operational requirements for properties covered by the NSPIRE Final Rule. Please note that although the Notice does not separately list the Section 232 Program, it does cross reference 24 CFR 5.701. 24 CFR 5.701(a)(7)(viii) makes the subpart applicable to projects with mortgages insured under Section 232 to the limited extent that REAC inspections are applicable to certain Section 232 properties (e.g., routinely on Assisted Living Facilities). The Notice covers what to expect before, during and after an inspection. It contains policies and procedures for properties participating in inspections, submitting evidence of deficiency correction, submitting technical reviews, administrative review, and other administrative requirements associated with the final NSPIRE rule.

Additionally, the NSPIRE administrative notice outlines roles and responsibilities for HUD’s Real Estate Assessment Center (REAC), HUD field office staff, Property Owners and/or Agents/Operators. The notice also contains requirements for inspectors performing inspections for REAC under contract. The implementation date for ORCF projects is October 1, 2023.

Please reach out to your assigned Account Executive should you have further questions or LeanThinking@hud.gov.

Keywords: Asset Management, Physical Inspections, REAC

Webinar Presentation on HUD’s 232 Program-Updates in Production and Asset Management– September 13, 2023, 2:00 P.M. Eastern Time

In a webinar hosted by the American Health Care Association/National Center for Assisted Living (AHCA/NCAL), HUD’s Office of Residential Care Facilities (ORCF) will provide a brief overview of the Section 232 program and will cover a range of topics related to HUD’s Residential Care Facility Mortgage Insurance Program. The webinar will run from 2:00 p.m. to approximately 3:00 p.m. Eastern Time on September 13, 2023, and will be open to AHCA/NCAL members and non-members. The webinar will be recorded. There is no charge for participation.

Presentation topics will include:

The recently implemented Green Mortgage Insurance initiative for Residential Care Facilities
HUD’s risk analysis related to facility compliance with the Home and Community Based Services Settings Rule
Compliance (by nonprofits) with the Single Audit Act Requirements
Recent changes regarding REAC NSPIRE physical inspections
The Why, Who, How, and When of HUD-required Action Plans
New Quarterly Financial Statement Reporting Fields
HUD’s Tools for Comparing Underwriting Projections to Actual Performance
Numbers/trends on application volume, timing, and underwriting issues of note

Speakers:

John Hartung, Director, Policy, Risk Analysis and Lender Relations Division, Office of Residential Care Facilities, HUD
Tim Gruenes, Director, Production Division, Office of Residential Care Facilities, HUD
Philip Head, Director, Asset Management Division, Office of Residential Care Facilities, HUD
Angela Collier, Deputy Director, Asset Management Division, Office of Residential Care Facilities, HUD

Event Date: September 13, 2023, 2:00 p.m. - 3:00 p.m. (Eastern Time)

Registration Link: Here

Although membership to AHCA/NCAL is not required to participate in the webinar, you will still need to create an AHCA/NCAL username and password to register for the webinar.

How to Register for AHCA/NCAL webinar:

Webinar participants will need to login using their existing ahcancalED username and password first.
Once you are logged in to the website you will be able to register for the webinar by clicking the green register button at the top of the page.
If you have forgotten your password click here.
To avoid technical problems, use Google Chrome.
If you are new to the site, you can create an account here. After creating an account, you will be able to register for the webinar. If you need further assistance with creating an AHCA/NCAL account, please email educate@ahca.org

How to Register for an AHCA/NCAL username and password:

Keywords: Webinar

Medicaid or Chip Coverage Renewal Reminder to Residents

To Owners and Operators - As you may know, states have been recertifying their Medicaid and Children's Health Insurance Program (CHIP) rolls for the first time since the start of the pandemic. This means your state will use the information they have to decide if individuals and families still qualify for Medicaid or CHIP coverage. Residents in Section 232 facilities may be Medicaid- or CHIP-eligible, but because Medicaid and CHIP are state-run programs, it is essential that families update their contact information and renew their eligibility this year to remain covered.

The timeline for these verifications varies by state, so please check here to learn more about the reverification process in your state, and let residents in your facilities know that this is coming!

Get ready to renew now: Send the below to your residents

Here are some things you can do to prepare for the renewal process:

Update your contact information - Make sure your state has your current mailing address, phone number, email, or other contact information. This way, they’ll be able to contact you about your Medicaid or CHIP coverage.
Check your mail - Your state will mail you a letter about your coverage. This letter will let you know if you need to complete a renewal form to see if you still qualify for Medicaid or CHIP.
Complete your renewal form (if you get one) - Fill out the form and return it to your state right away to help avoid a gap in your coverage.

If you no longer qualify for Medicaid or CHIP

You may be able to buy a health plan through the Health Insurance Marketplace® and get help paying for it. Marketplace plans are:

4 out of 5 enrollees can find plans that cost less than $10 a month.
Plans cover things like prescription drugs, doctor visits, urgent care, hospital visits, and more.

For More Help

If you’re eligible, you may be able to sign up for Medicare or change your current Medicare coverage. Get started with Medicare.
Contact your state Medicaid office for more information about Medicaid or CHIP renewal. You can find links to state contacts below.
Call the Marketplace Call Center at 1-800-318-2596 to get details about Marketplace coverage. TTY users can call 1-855-889-4325.

Keywords: Medicaid

October 2023

October 25, 2023

Reminder on Addressing Climate Impacts in Environmental Assessments

Lenders and environmental consultants are reminded that applications submitted after December 1, 2022, and which require an Environmental Assessment (EA) level review, must address current and reasonably foreseeable climate impacts along with Energy Efficiency and all other EA factors. Details were published in ORCF’s August 25, 2022 Email Blast.

The requirements do not apply to Section 232/223(f) projects or other Categorically Excluded projects. Please see Handbook 4232.1, Section II, Chapter 7 for a description of Categorical Exclusions.

Keywords: Environmental Assessment, Climate, Environmental Consultant

November 2023

November 20, 2023

CMS Red Hand Consumer Alert Icon

ORCF has received inquiries from lenders regarding underwriting of projects with the Centers for Medicare and Medicaid Services (CMS) Red Hand Consumer Alert Icon. Successful applications have included a 3-month quality of care debt service reserve escrow, a one-time risk management assessment that has been complete prior to application submission, an analysis of the impact of the consumer alert icon on the marketability and occupancy of the project, and have addressed the items in the December 19, 2018 Email Blast.

Criteria for the one-time on-site risk management assessment is described below.

The consultant must have demonstrated successful experience in risk management for healthcare facilities to conduct a one-time, on-site risk management assessment. The one-time on-site risk management assessment must include the following:

Review of both operational and clinical processes.
1. Review of the environment for liability risk exposures.
2. Identification of operational and clinical opportunities.
3. Making recommendations for improvement of operational and clinical processes.
4. Developing a strategy to implement the recommendations.

Keywords: Underwriting

Confirming Debt Service Coverage Ratio Before Underwriting Review Begins

As a reminder, the expected minimum underwritten Debt Service Coverage Ratio (DSCR) is 1.45, as set forth in Handbook 4232.1, Production Chapter 3.2. Moreover, when arriving at the underwritten revenue and expenses used to calculate Net Operating Income (NOI) used for the DSCR, the lender must consider the historic and trailing twelve-month (T12) performance. (See Handbook 4232.1, Production, Chapter 2.9.N.)

Although the NOI arrived at by the lender during underwriting will not necessarily be equal to the T12 NOI, ORCF generally uses that figure as a benchmark to discern when a project is ready for underwriting review (See May 9, 2022 Email Blast). This was necessary given the wide pandemic-related fluctuations in income and expenses. As facilities have been recovering from the pandemic and their NOI is trending upward, however, this screening benchmark appears to be unnecessarily delaying the underwriting review of numerous projects in which the underwritten NOI would appropriately be higher than the T12 NOI.

Accordingly, ORCF is adjusting the benchmark used to initiate underwriting review. In addition to the previously established benchmark of 1.45 DSCR on the T12, ORCF is generally willing to consider a T12 adjusted for a new published Medicaid Rate offset by some increase in expenses and an annualized T6 for purposes of initiating the review. Specifically, lenders may provide a sensitivity comparing the following two calculations:

T6 actual NOI annualized (no adjustments for rate increases may be applied);

and

T12 NOI adjusted to reflect a documented increase in Medicaid rate, if applicable, offset by some increase in expenses. The offset can be achieved by applying a reasonable, stabilized historical operating margin to the increased revenue. Any documented rate increases must be in effect as of the date of the T12.

When utilizing the above adjustments, in the Decision Circuit lenders should provide a column with the T12 without adjustments, a T12 adjusted for a new published Medicaid Rate (in a yellow column), as applicable, and the annualized T6 (in a yellow column).

Keywords: Underwriting

December 2023

December 20, 2023

Required Use of Portfolio Manager for Green Mortgage Insurance Premium Compliance Reporting

On November 20, 2023, HUD’s Office of Multifamily Housing Programs and Office of Residential Care Facilities published a Housing Notice titled Required Use of Portfolio Manager for Green Mortgage Insurance Premium Compliance Reporting, which pertains to changes to annual compliance reporting for Green Mortgage Premium (MIP) rate recipients. The Notice replaces previous instructions provided to Section 232 properties as noted in ML 2022-13. Read the full Notice here.

The Office of Residential Care Facilities owners must benchmark their properties using the Environmental Protection Agency (EPA)’s ENERGY STAR® Portfolio Manager® for Green MIP loans starting with all applications submitted on or after January 1, 2024. The client will be required to create an account in Portfolio Manager and enter queried property information. For Section 232 properties, the user must select ORCF Benchmarking and use the Healthcare, “Senior Living Community” property type in Portfolio Manager. To gain access to the benchmarking tool, property owner(s) can create a no-cost account at Portfolio Manager Login | ENERGY STAR.

ORCF existing properties pursuing a Green MIP loan are required to benchmark both energy and water though Portfolio Manager in accordance with the benchmarking instructions. The benchmarked Statement of Energy Performance (SEP) must also be delivered with the mortgage application as required by ML 2022-13. The Statement of Energy Intent is not benchmarked but is delivered with the loan application. After the retrofits or construction is complete, the client will submit the post-improvement (as-is) Statement of Energy Performance (SEP) in Portfolio Manager for both New Construction, Substantial Rehabilitation and Existing projects, then annually.

Annual SEPs will be submitted through Portfolio Manager no later than March 31 after the 12-month data collection period of January 1 to December 31. Portfolio Manager will automatically gateway the benchmarked SEP data to HUD’s Integrated Real Estate Management System (iREMS).

Please review Multifamily and ORCF’s Benchmarking Instructions here: Benchmarking Instructions.

Keywords: Green MIP, Benchmarking, Portfolio Manager

Department of Labor Publishes Final Rule Updating Davis-Bacon and Related Acts Regulations

On August 23, 2023, the Department of Labor (DOL) published the final rule that updates regulations issued under the Davis-Bacon and Related Acts.

Please note the following:

The final rule went into effect on October 23, 2023.
Provisions of this final rule regarding wage determination methodology and related part 1 provisions prescribing the content of wage determinations may be applied only to wage determination revisions completed by the Department of Labor on or after October 23, 2023. Except with regard to § 1.6(c)(2)(iii), the provisions of this final rule are applicable only to contracts entered into after October 23, 2023.
Many of the amendments to part 5 of the regulations are regulatory changes that codify the Department of Labor's current practices and interpretations of existing regulations. As a result, such changes do not, in practical terms, impose new obligations on contractors or contracting agencies.
For contracts that lock-in on or after the final rule effective date, October 23, 2023, Contractors should consider the changes in the final rule when analyzing internal controls, developing their bids, and negotiating contract pricing.
Contract clauses and related matters section of the rule covers the required contract clauses inserted into contracts.

Office of Residential Care Facilities Implementation

The Office of Residential Care Facilities will determine any needed edits to the Form HUD-92554-ORCF, Supplementary Conditions of the Contract for Construction, in light of these regulatory revisions, in our next revision update, subject to OMB Paperwork Reduction Act approval.

See the DOL Final Rule for additional information.

Keywords: Davis-Bacon

Reminders on Environmental Items

ORCF would like to remind lenders of a few environmental items:

Environmental items requiring repairs such as asbestos abatement, radon mitigation or recommendations of the Phase I consultant must be included in the repair list in the PCNA, in the Lender’s Narrative and in Exhibit C to the Firm Commitment.
Radon Mitigation is considered to be a repair in excess of routine maintenance per CPD Memo 16-02, so applications with Radon Mitigation are subject to Section 106 Historic Preservation review.
Repairs in the Repair list, Exhibit C to the Firm Commitment, must describe repairs in sufficient detail to facilitate inspections, schedules of repairs and credible bids. When repairs are not sufficiently described, HUD staff and the State Historic Preservation Office cannot determine whether a repair exceeds routine maintenance and whether the repair will have an adverse impact on historic properties.

Keywords: Underwriting

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