3.7.8 Defaults, Claims, or Enforcement Referrals

A. HUD does not prohibit applications for mortgage insurance for projects that have previously experienced default, assignment, or were formerly HUD-held loans. However, HUD will not accept any application from a Borrower/Principal who has had a previous loan or other financial relationship with HUD and not proven to be a good business partner, or for a property which has proven to be unsuccessful or infeasible in the past, especially if any inherent negative attributes remain uncorrected. The Lender should accept such applications only after they have documented the economic, physical, operational, or management changes that have occurred, thereby justifying an application for new insurance. A concept meeting prior to submission is required to address the history of the loan and of the Borrower/Principal, including past Regulatory Agreement compliance. Similarly, the Lender should ensure that the Borrower, the proposed Management Agent, and/or the Project have not been referred to HUD’s Departmental Enforcement Center (DEC), or if such a referral has been made, that all issues have been or will be resolved.