The Federal Housing Administration (FHA) has released a much-anticipated new version of its Multifamily Accelerated Processing (MAP) guide, with an eye on improving its notoriously long processing times.
The new guide consolidates all of the agency’s multifamily program changes and guidance—notices, mortgagee letters, and frequently asked questions—in one place, collecting information that lenders, and even HUD staff, sometimes had trouble finding. The guide also provides expansive clarity around affordable housing transactions, an area that had been severely neglected in previous versions.
Processing times could theoretically improve thanks to the new guide, since lenders and HUD staff won’t have to spend so much time researching and debating what’s allowable. But don’t expect material improvements in the short term—the FHA is still digging itself out of the wave of business that has come its way over the past year.
“The long-term effect of the MAP changes will be really beneficial,” says Phil Melton, managing director at New York–based MAP lender Centerline Capital Group. “But you still have a short-term issue that’s going to take some time to play itself out. You still have to get through the current logjam.”
While turnaround times are slowly improving, they’re still far from swift. A new-construction deal done through the Sec. 221(d)(4) program can take up to a year, and a refinance or acquisition loan through the Sec. 223(f) program can take seven to nine months.
But these time lines vary greatly depending on the deal as well as which HUD regional office you’re dealing with. Some offices, like Columbus, Ohio's, are saying they can turn around Sec. 223(f) applications in 60 days.
But are those 60 calendar days or 60 business days? In a slight of hand, the definition of “days” changed in the new MAP guide. The agency promises a pre-application review of 45 days for Sec. 221(d)(4) loans, and another 45-day review of the firm commitment application, for instance. Those days used to be calendar days, but now they’re measured in business days in the guide, stretching out the time line.
Victim of Its Own Success
Right now, it doesn’t matter if you count in calendar days or lunar days—those review time lines are just a best practice, something the FHA aims for, but not reality.
“To be honest, I don’t think many offices at this point, given their staffing and resources, can meet the time frames that are established,” says Ed Tellings, FHA chief underwriter at Columbus, Ohio–based MAP lender Red Mortgage Capital. “It’s a little better now than it was six months ago, and that has a lot to do with HUD getting through that volume of business they received last September.”
Indeed, much of the current logjam can be traced to last September. The FHA changed its loan parameters in July 2010 to make them less generous for market-rate deals—debt service coverage went up, and leverage went down. But deals that were sent before Sept. 1, 2010, were grandfathered in under the previous, more generous, terms, and the resulting wave of volume buried the agency.
In many ways, the FHA is a victim of its own success. Last fiscal year, the FHA processed a record $10.4 billion in multifamily deals, a figure it surpassed in August, with still more than a month left to go in the 2011 fiscal year.
Even as the capital markets improve and more lending options become available, many borrowers still think the FHA is worth the wait. Sec. 221(d)(4) deals are being quoted just under 5 percent, a great rate for 40-year, nonrecourse money that can go up to 83.3 percent leverage on market-rate deals. And Sec. 223(f) deals for a refinance or acquisition are currently being quoted in the low–4 percent range.
The agency has made other moves, as well, this year to keep the pipeline moving. It will refund the fee for an application it hasn’t gotten to yet, and some of its overwhelmed offices, such as San Francisco, are sending work to less-overwhelmed offices, such as Phoenix. And notably, the FHA recently overhauled its loan closing documents for the first time in 20 years, standardizing underwriting and narrative templates and generally streamlining the process.
Overall, lenders are pleased with how the new MAP guide turned out and applaud the HUD multifamily brain trust, especially Chris Tawa, Dan Sullivan, and Janet Golrick, for delivering on their promise.
“By providing clear guidance, it should allow people to move quicker on those issues where HUD offices and lenders get hung up,” says Tellings. “HUD’s done a really good job of taking a lot of questions and issues and putting them all in one place.”
Note: For information on what the new MAP guide means to affordable housing borrowers, check out the October edition of Affordable Housing Finance.
