A.5.7.4.2 Lender’s General Review and Underwriting Duty

A. Prior to submission of a CNA, it is the duty of the Lender to review, address, or correct each of the following:

1. Complete CNA. Assure that the Preparer (generally the Needs Assessor or Lender’s Construction Analyst) has completed the CNA e-Tool in accordance with the MAP Guide and that all the required information is correct and complete.

2. Repair/Replace Recommendations and Decisions. Review and accept the CNA preparer’s Repair Replace Recommendation, or if the recommendation is not accepted and requires modification, specify a revised decision on the Repair Replace Decision screen.

3. Immediate Repairs. Assure that any immediate repair is described specifically with a quantity, cost, and location, as well as any applicable and necessary qualitative or product specific information such

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as size, model, product performance standard, level or nature of the finish, and/or brand name, if applicable. When useful to understanding and comprehension, annotated photography may be attached to the CNA at the submission to pinpoint the nature, extent, or location of a repair/replacement action.

4. Accessibility Critical repairs. Review the Accessibility Critical repairs and ensure that statutes and regulations are correctly applied, deficiencies identified, appropriate remedies specified, and that implementation of each remedy is scheduled for completion as soon as possible.

5. Utility Conservation Metrics. When proposing Green Mortgage Insurance Premium (MIP) rates or reductions in historic operating expense resulting from proposed utility conservation measures, the Needs Assessor and Lender must complete the utility rates, utility type and component consumption fields of the CNA e-Tool. See MAP Guide Chapter 6 for instructions on energy and water conservation.

6. Financial Factors. Enter financial factors and variables and prepare a balanced financial plan for funding anticipated capital costs. “Balanced,” in this context, means that the combination of any existing Reserve for Replacement sums carried forward plus any initial and annual deposits plus periodic interest earned on balances equals or exceeds the projected capital costs plus any minimum balance requirement for years 3 through 10 in the Estimate Period. Also, in the second ten years, any deficit below the required minimum balance does not exceed (in dollar amount) 50% of the cumulative amortization of the insured loan balance for the year in which the deficit occurs. (See “Lender’s Financial Plan”, Appendix 5, Section A.5.7.4.3 below.)

7. Lender Validation and Submission. The Lender validates and submits CNAs by accessing the CNA e-Tool for submission. The submission portal is a secured web address that may be accessed only by authorized submitters using appropriate credentials (login IDs) and passwords. The website link to the portal is provided on the CNA e-Tool Home Page. For applications for mortgage insurance, a submitter should submit a CNA only at the time that a full application for mortgage insurance has been filed and requisite fees paid.

8. Addressing Flags. Needs Assessors may send CNAs to Lenders even when there are flags upon validation. Typically, the Needs Assessor will have already corrected any flags that do not involve underwriting judgment. Flags that remain (other than severe flags that must be corrected) may not require a change in the CNA if the Lender provides an appropriate explanation of why the matter flagged is not a circumstance or result inconsistent with the MAP Guide or sound underwriting. Such explanations are entered as the “Submitter Response” under flag notes (a text box) that the Submitter may add next to each flag listed in the validation results. If after submission HUD disagrees with the CNA as submitted, the objection will be expressed in a flag note. The CNA will be returned to the Submitter, who will be notified by an automatic e-mail that the submitted CNA has been returned by HUD. The Submitter may then address the flag notes and/or modify the CNA and submit the revised CNA. The use of flags and flag notes enables HUD and Lenders to exchange comments and resolve issues using successive versions of the same CNA.

9. Version Control for CNAs.

   • From application to Firm Commitment. Each CNA e-Tool submission is assigned with a systemgenerated unique identification number called “Assessment ID” as a way of version control. The Assessment ID is a six-digit number composed of the calendar year followed by a six-digit number (yyyy-######). At any point in time, only one CNA for a particular property (as identified by

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FHA # and/or REMS #) may have the status of “Submitted,” “Under Review” and “Saved as a Draft.” An unlimited number of versions may have the status of “Returned,” but only one version will advance from the “Under Review” status to “Approved.” The approved CNA is the version that will be used at Firm Commitment to produce a list of required repairs, relevant construction documents/schedules, amounts required for repair escrows and assurances of completion and required initial and annual deposits to the Reserve for Replacement escrow.

• Amendments after Firm Commitment. Sometimes unforeseen circumstances or uncorrected errors require amendment of a Firm Commitment. If required changes concern aspects of the CNA (e.g. the list of immediate repairs, the amount of the initial or annual deposit to the reserve for replacements, etc.), HUD may authorize an amended CNA by choosing to “Undo Approval,” changing the status to “Under Review,” whereupon HUD will return the CNA to the submitter. The submitter will receive an e-mail message indicating the returned CNA. Then a revised CNA may be resubmitted to be reviewed and approved by HUD. When again “Approved,” the resulting version is the “Amended” CNA current as of the date of its amendment. It is the intent of the CNA e-Tool to capture for a permanent record the CNA approved for Firm Commitment and any amended CNA to reflect the actual requirements for Endorsement.

10. Intrusive Examination. The Lender must assure that the Needs Assessor has used a level of inquiry appropriate to the age and condition of the property in order to report with confidence the nature of existing components, their condition, and their assessed RUL even when the level of inquiry required by observed circumstances exceeds the minimum “Non-Intrusive” standard of inspection defined by ASTM E2018-15. If such intrusive examination is conducted by a third party other than the Needs Assessor, the Needs Assessor must provide, and the Lender must submit any resulting reports or observations as an attachment to the CNA.