A.8.3.13 — HUD Multifamily Accelerated Processing (MAP)

A. The location of the required exhibits shall be identified by the Lender’s Table of Contents. The following groups of items represent the suggested guidance for preparing a prior credit approval request:

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Group 1: Lead Lender’s Request and Summary
- A cover letter, signed by the lead lender, summarizing the request to HUD.

The letter should explicitly state the requested total dollar amount of authority, based on the proposed FHA projects, rounded up to the nearest $5 million (i.e. existing balances are $450 million, proposed FHA loans are $67 million, then the request should be for $520 million).
The letter should identify each principal scoped within the request, and if the request is mandatory or voluntary (see MAP Guide Chapter 8, Section 8.6).

Group 2: Role and Experience of Active Principal(s)
- A narrative analysis of the Active Principal’s experience. The narrative should disclose exactly what role causes the principal to be subject to mortgage credit analysis (e.g. managing member of Borrower, etc.).

Include a description of expertise areas or resources the Active Principal contributes to the portfolio (e.g. the principal is relied on for his expertise in acquisition sourcing, ownership structuring, and affordable housing regulatory compliance).
Include a description of the Active Principal’s experience, emphasizing commercial/multifamily real estate experience. Include summary metrics (e.g. developed 10 projects with 2,000 units since 1995).
- Include a description of the Active Principal’s high-level experience with HUD programs (i.e. general experience is a given because this is prior credit review, so this should segment experience such as construction, market rate vs affordable rents, FHA healthcare projects, etc.).

Group 3: Credit Analysis of Active Principal(s) and/or Related/Affiliated Organizations
- A narrative analysis of the Active Principal’s and/or Related/Affiliated Organizations financial history and strength, credit history and related credit worthiness (e.g. residential and/or business credit reports, OFAC searches, etc.).

Include a specific conclusion as to the underwritten net worth, current liquidity and cash flow of the Active Principal(s) and the Related/Affiliated Organization(s) and whether financial resources are adequate to meet anticipated needs during the 24 month period following the request for prior approval and any additional period required to stabilize new developments or troubled assets.
Active Principals or Guarantors and/or Related/Affiliated Organizations providing the FHA insured multifamily project with all or a sufficient portion of the required capital must submit reviewed, compiled, and/or consolidated financial statements prepared in accordance with Generally Accepted Accounting Principles (GAAP) financial statements for the most recent threeyear period and Y-T-D prepared by a third-party independent CPA Audited or certified financial statements prepared by a third-party independent CPA may be submitted, but are optional and not required.
Individual financial statements (form HUD-92417) must show a reporting period of no less than the most recent twelve-month period, the reporting period shall be documented in the, "Date of Statement" (e.g. 1/1/18 to 12/31/18). The most recent three years of federal tax returns may be

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required, if individual financial statements are underdeveloped and are not prepared by a thirdparty.

The Active Principal’s providing required capital into the proposed transactions should be able to show at least a minimum of two percentage (2%) of working capital in relationship to the total development costs of each proposed FHA-insured projects. Passive Principals contributing a majority of equity to the Active Principal(s) and/or Related Entities/Affiliates shall be subject to a financial and credit analysis.

Group 4: Succession Plan
- A succession plan of the active principal(s), which should describe the provisions made by the principals to assure continuity and orderly succession in leadership and/or orderly disposition of assets in the event of any incapacity of the principal. This description must include a brief summary of partner buy/sell agreements, provisions for key person insurance and/or similar measures sufficient to evidence careful planning for these contingencies. Descriptions of prior changes in leadership, if any, should be provided if they document how the principal would deal with future changes.
Group 5: Ownership and Equity Analysis

Lender’s narrative describing the principal’s approach to ownership strategy and construct of this strategy. The strategy described should be internally consistent with other exhibits, such as affiliate entities and the source of revenue on financial statements.
- Organizational Chart for the typical ownership entity and an Organizational Chart for the parent company with the Active Principals identified with accompanying percentage of ownership and roles clearly defined. See Chapter 8, Section 8.3.2.E-F for organization chart guidance.

Group 6: REO/Mortgage Debt Analysis
- A REO schedule listing all FHA insured projects with accompanying project numbers, HUD’s Section 8 subsidized/assisted projects, insured healthcare projects and conventional projects.

A status report for FHA insured projects currently in process with the local Regional/Satellite Production Office, projects in lease-up and the percentage of completion of all FHA insured loans in construction.
The REO must include a full year of operational history, a disclosure of mortgage debt, e.g. type, maturity, age, interest rate, vacancy rate, NOI, LTV, DSCR and a financial plan for mortgage debt maturing within five years of submission of the prior approval credit package. The REO schedule must also include a financial chart indicating an analysis of the occupancy change, NOI change, revenue change, expense change, the lowest 10% (DSCR) and the highest 10% (LTV) over the latest 3-year period. (For an example of the suggested format for the analysis of the REO schedules, see Appendix 8, Section A.8.7)
A narrative addressing geographic concentration risk. Describe potential circumstances that would impact the stability of the principals’ portfolio such as mitigating factors if the primary market area is experiencing slower lease-up periods (longer than 18 months) or the over saturation of available rental units in the primary market area because of new projects coming on line, the existence of declining market values, or regional economic distress.

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Group 7: Proposed FHA Projects & Financing Plan

The project name or a description of properties that are proposed for FHA insurance with an estimate of the cash requirements for closing each transaction and indicating whether the properties proposed for insurance are already held in the principal’s portfolio, the purpose of the anticipated financing (refinance, rehabilitation, new construction) and the rationale and criteria used for selection of the proposed new insured properties (e.g. potential for cash flow or physical improvement, asset type, size, target market, geography, etc.). Generally, proposed projects should be specifically named and identified by address, but where acquisition, development or refinancing targets are to be determined, tentative or contingent, projects may be described generically.
- Financing plan disclosing equity/cash requirements for new construction, acquisition and substantial rehabilitation projects at the time of anticipated loan closing and future cash requirements of the existing REO portfolio for the period of time covered in the prior approval request.

Group 8: Management Agent Analysis & REAC Inspections
- Narrative summary of the Management Agent of the Multifamily portfolio. If concentrated, identify the firm of the Management Agent(s) representing the concentration. Describe the Management Agent’s experience in high-level metrics (e.g. 5,000 units under management among 25 properties in 6 states) and key staff. If an Identity of Interest (IOI) relationship or an equity interest exists between the management entity and the Active Principal(s) and/or Affiliates a business credit report shall be required. A financial analysis may be required if there is a concern about the capacity of the Management Agent to perform its assigned role.

Narrate the current physical condition and REAC scores in summary form (ranges, least favorable scores, etc.) of the active Principal’s existing FHA insured and/or HUD’s assisted/subsidized properties. Provide narrative explanations for any REAC scores of 65 or below.

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Appendix 8 Mortgage Credit Requirements A.8.4 Mortgage Credit Underwriting Documentation Matrix

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