19.4.1.7 Multi-Tiered Review of Requests for Substantive Changes

A. This tiered review is intended to facilitate uniformity, efficiency, and consistency among HUD offices, and HUD’s fair and equal treatment of program participants. HUD will only approve such requests when HUD determines that the request is supported by a compelling deal-specific justification. All requests for substantive changes must be consistent with federal, state, and local law.

1. Regional Review for Cause. When Lender’s Counsel submits a substantive change request, the HUD Closing Attorney will discuss the requested change with the RC Director. The RC Director is responsible for determining whether, as a matter of program policy, the request is warranted. If the RC Director determines that the change is not warranted, the RC Director will notify the Lender, Lender’s Counsel and HUD Closing Attorney.

2. Legal Conflicts Review . If the RC Director determines that the substantive change is warranted as a matter of program policy, the RC Director will verify whether there is any need to waive related program directives and refer the request to OGC for legal conflict clearance. If not previously cleared for statutory and regulatory conflicts, the HUD Closing Attorney will complete the legal conflicts review in coordination with the appropriate Regional Counsel.

   • No Conflicts. If there are no statutory or regulatory conflicts related to the request, the HUD Closing Attorney will forward the request to HQ for final consideration.

• Regulatory Conflict. If there is a regulatory conflict, the HUD Closing Attorney will discuss the regulatory conflict with the RC Director and HQ OGC. If the RC Director determines that it is in HUD’s best interest to approve the requested change notwithstanding the regulatory conflict, the RC Director will prepare a draft regulatory waiver for referral to HQMHP.

Statutory Conflict. If there is a statutory conflict, the request will be rejected.

3. Addressing Other Legal Concerns. Once the request is evaluated for conflicts, the HUD Closing Attorney will determine if there are any other legal concerns (including impacts on other closing documents). If the HUD Closing Attorney identifies other legal concerns, they will document the concerns in writing and include the written explanation with their referral of the request to HQ.

4. Referral to HQ. The HUD Closing Attorney will refer the request via email to the Assistant General Counsel for the Multifamily Mortgage Division (MMD). The MMD is responsible for coordinating its review and the review of the HQ Office of Multifamily Housing Production (HQ MHP). The HUD Closing Attorney must ensure the following information is included in the referral to HQ:

   • A description of the substantive change(s) requested, including a reference to the relevant document(s) and/or policy. When applicable, a redline excerpt of the relevant document

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provision identifying the requested change(s) may be included in the submitted narrative (redline comparisons of entire documents will not be reviewed);

• Confirmation that the RC Director supports the request;

• Confirmation that there are no identified statutory conflicts;

• Explanation of regulatory barriers, if any;

• An explanation of why the change is supportable, i.e ., the justification approved by the RC Director, including compelling deal-specific and unique circumstances underlying the requested change. The justification should include enough detail, context, and rationale to allow HQ MMD and MHP to make an informed determination, as well as to establish that HUD is not acting in an arbitrary and capricious manner in its decision-making;

  • An explanation of whether the requested substantive change relates to a separate request for waiver of a housing directive (form HUD-2), and if so, confirmation that the RC Director is willing and able to approve the related form HUD-2 waiver;

• When available, –a copy of any related requests to waive a program directive;

• An explanation of the extent to which such change impacts other documents;

  • A discussion of additional legal considerations and concerns, if any, including any reservations of the HUD Closing Attorney; and

• A statement of any time constraints.

5. HQ Review . The MMD will respond to the HUD Closing Attorney in writing. HQ staff will make every attempt to respond within ten (10) business days, provided the submitted justification meets the requirements of this Chapter. Program participants should submit substantive change requests as early as possible, and well before their desired closing date. When the substantive change request involves matters of program policy, the MMD will solicit the review and decision of HQ MHP, which will make the final determination on behalf of HUD. The MMD will review and decide requests that are strictly legal in nature.

6. Approved Substantive Change Requests. The MMD will provide a copy of approved substantive change requests to the assigned HUD Closing Attorney and appropriate Regional Counsel. The HUD Closing Attorney will notify the RC Director. Approved substantive change requests will be noted by the RC Director in their administrative clearance to close.