9.2.1 Lender Responsibilities and Limitations

A. The Lender must submit an environmental report to HUD using the HEROS system for all projects submitted under MAP. The HEROS submission must follow the requirements as described in this chapter. The failure to submit a complete environmental report, including applicable supporting documentation, may cause delays in the environmental review process.

B. The Lender must identify any environmental issues to be resolved in the HEROS submission and in the Lender Narrative, including a plan accompanied by a timeframe to resolve identified issues, cost estimates and identification of those responsible for implementing the plan. To the extent possible, all environmental issues should be resolved prior to submission of the application. HUD will not upload the Lender Narrative to HEROS.

C. HUD environmental policy requires that there be a limitation of certain activities or actions by any direct or indirect parties[25] to the transaction from the time of pre-application (or application for straight to Firm deals) until HUD has completed the environmental review process. Specifically, no action concerning the proposal shall be taken prior to completion of the environmental review which could: (1) have an adverse environmental impact, (2) limit the choice of reasonable alternatives, or (3) prejudice the ultimate decision on the proposal. Activities that limit the choice of reasonable alternatives include an action or commitment to undertake real property acquisition, repair, rehabilitate, construct, demolish or clear the site.

1. Certain actions are permitted prior to the completion of an environmental review, such as development of plans or designs, or performance of other work necessary to support an application for Federal, State or local permits. Planning activities include rezoning, platting or replatting. Site studies and assessments that will not have an environmental impact include Phase I and Phase II Environmental Site Assessments, wetlands delineations, and minimal associated soil borings. Ground disturbing activities beyond minimal soil borings or minimal archaeological tests for site assessment purposes are choice limiting actions and cannot be taken prior to completion of the environmental review.

2. Existing multifamily properties may continue normal operations during the FHA application process including leasing to new tenants, completing maintenance and repairs related to unit turnover, and regularly scheduled or emergency repairs. Deficient conditions or needed replacements identified in the Capital Needs Assessment prepared as part of an application should be promptly repaired if the work is characterized as a Critical-Life Safety repair. Other identified repairs that exceed routine maintenance (as discussed in Section 9.1.3.C.2.a) may not proceed prior to completion of the environmental review.

3. Other actions are strictly prohibited until an environmental review is completed, such as demolition, modification of a wetland, or actions that adversely affect a historic property. Pursuant to the “anticipatory demolition” requirements of Section 110(k) of the National Historic Preservation Act (54 U.S.C. 306113), even before application submission takes place, any action by a potential Lender

25 Direct or indirect parties include the Lender, Borrower, Developer and related partners.

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Chapter 9 Environmental Review and Requirements

9.2 Procedures

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or Borrower, or any action by another party that the Lender or Borrower has the legal power to prevent, that is taken with the intent to avoid Section 106 review and that significantly adversely affects a historic property, could result in rejection of an application.

4. If a project has received an encouragement letter or invitation letter after a concept meeting or submission of a pre-application, respectively, and an application is not submitted for mortgage insurance by the lender within the approved timeframes, or is submitted for mortgage insurance but withdrawn by the lender prior to the issuance of a commitment to insure, then the project is no longer federalized. If the project is resubmitted for mortgage insurance at a later date, then any environmental compliance concerns noted by HUD during the project’s original concept meeting/preapplication/firm commitment application must be addressed at re-submission. The revised application must describe any actions taken at the project site post HUD review that might have adversely affected or otherwise threatened compliance with any originally noted environmental concerns. These actions, if taken by the owner, may impact the acceptability of the project and may result in rejection of the re-submission.

5. If any party is unsure as to whether an action would fall within such limitations it should seek advice and possibly determination by HUD.

6. This section does not change the long-standing FHA prohibitions on any construction (other than activities outlined in Section 9.2.1.C.1-2) after a concept meeting. The Lender must instruct the Developer that modification of the site (e.g. grading, clearing, filling) after a concept meeting is expressly prohibited.

7. These restrictions apply to early start of contractually-related construction activities discussed in Chapter 12 and pre-endorsement improvements discussed in Chapter 5, Section 5.8.