A.5.7.2.2 Applications for Refinancing or Acquisition of Existing Properties

A. The purposes of the CNA prepared for refinancing or acquisition transactions (or for supplemental loans funding repairs and alterations) are not only to describe the physical inventory and to plan for future repairs and replacements but also to assess current conditions and identify, specify, and estimate immediate repair needs. Immediate repairs must be classified as either Critical or Non-critical.

1. Critical repairs. Critical repairs are of two types.

   • Remedies that correct the following conditions that must be completed prior to initial endorsement:

• 1. Endanger the health and safety of residents, visitor or passer-by.
• 2. Endanger the physical security of the property.
• 3. Pose obstacles to ingress or egress from units, buildings or the site.
• 4. Prevent the project from reaching sustaining occupancy.
• 5. Any deficiencies that are in violation with applicable and relevant building code, standards and regulations.

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• Accessibility remedies for noncompliance with of one or more of the accessibility statutes that apply to the property or to any of the buildings. Such remedies must be completed as soon as possible . The time period must be specified as a number of months ranging from “0” (which indicates prior to endorsement) up to “12” (which means 12 months after endorsement). In rare instances where accessibility remedies cannot be completed within 12 months, additional time may be permitted only when explicitly approved by the Division of Technical Support in the Office of Multifamily Production at HUD Headquarters. See Appendix 5, Section A.5.2 for a description of accessibility requirements.

2. Non-critical Repairs. Non-critical repairs are repairs, replacements or alterations that address current and imminent physical needs, notwithstanding whether any such needs may be described as deferred maintenance.

   • “Imminent,” in this context, means work reasonably expected to be needed within the first two years of the mortgage, except that this shall not be construed as requiring as an immediate repair any work that would normally occur at unit turnover.

• Non-critical repairs may include work likely to restore, improve, or enhance the quality, suitability, marketability, and operating efficiency of the property.

• Non-critical repairs must be completed within 12 months after endorsement unless otherwise specifically permitted by HUD.