HUD recently released a proposed rule, Docket No. FR-5444-P-01, which proposes to establish regulations for lender and underwriter eligibility for participation within the Multifamily Accelerated Processing (MAP) program and rules for the Federal Housing Administration’s (FHA) process for approving MAP lenders and underwriters. More specifically, the rule proposes to establish a tiered lender approval system, the periodic expiration of approval, and lender application for re-approval under the MAP system.

Under the proposed rule, the tier approval designation will be based on a lender or underwriters multifamily transaction experience, as evidenced by recently closed loans and each loan’s performance. According to the rule, MAP lender or underwriter may not use MAP to process or underwrite loan transactions that are not covered by the lender’s or underwriter’s approved tier, which are as follows:

  • Tier 1: Acquisition and refinancing programs (i.e., the FHA 223(f) or 223(a)(7) programs) without government subsidies1;
  • Tier 2: Acquisition and refinancing programs (i.e., the FHA 223(f) or 223(a)(7) programs) with or without government subsidies;
  • Tier 3: All MAP-eligible programs (i.e., the FHA 220, 223(f), 223(a)(7), 221(d), 231, and 241 programs) without government subsidies; and
  • Tier 4: All MAP-eligible programs (i.e., the FHA 220, 223(f), 223(a)(7), 221(d), 231, and 241 programs), with or without government subsidies.

HUD has designated specific lender and underwriter general approval requirements within the proposed rule. In a separate rule (Docket No. FR-5444-N-02) also proposed by HUD, the agency has proposed certain quantity, specific characteristics, and recentness of transactions that a lender or underwriter must have undertaken in order to qualify for each tier of MAP approval. More specifically, the rule increases the minimum number of transactions with the lender/underwriter experience requirements from three firm commitments issued or closings within three years to five firm commitments issued or closings within the past five years. FHA hopes this minimum threshold will ensure appropriate management of risk to the FHA insurance fund and will ensure that MAP lenders and underwriters have adequate transaction experience before they undertake their first transaction pursuant to their MAP approval at a given tier.

Currently, the MAP approval designation does not expire unless there is an enforcement action that results in termination, or there is an eligibility requirement that the FHA-approved lender no longer meets. However, given the trust and responsibility FHA places in approved lenders, the agency must ensure that these lenders remain competent, not only at the time of initial approve, but through the lender’s tenure as an approved FHA-lender. This proposed rule would require approved lenders to apply to FHA to renew their approval every four years. When determining whether MAP approval should be renewed or disapproved, FHA will consider factors such as the lender’s record, including any sanctions or enforcement actions taken against the lender, its default and claim rates, and the overall performance of its underwritten or closed loans. Approved MAP lenders may also submit an application to be approved by HUD at a higher tier. HUD will use the same approval process when approve MAP lenders for application renewal.

Finally, the proposed rule includes procedures for newly approved MAP lenders, inactive MAP underwriters, MAP lenders in poor standing/on probation, the appeals process for HUD decisions, procedures for the imposition of sanctions, and the process for which HUD may suspend or terminate a lender’s MAP privileges.

Comments on this proposed rule are being accepted by HUD for 60 days. Interested participants may submit comments by mail to HUD Desk Officer, Office of Management and Budget, New Executive Office Building, Washington, DC 20503 and Reports Liaison Officer, Office of Housing, Department of Housing and Urban Development, 451 7th Street, SW, Room 9116, Washington, DC 20410 or by fax to (202) 395-6947. Comments may also be submitted electronically through the Federal eRulemaking Portal at
http://www.regulations.gov. Comments must refer to the proposal by name and docket number (FR-444-P-01).

1 Government subsidies refer to programs such as the Low-Income Housing Tax Credit (LIHTC) program, tax-exempt bond financing, HUD’s Section 8 Project-Based Rental Assistance program, and HUD’s Section 236 Interest Reduction Payments and similar forms of rental subsidy for affordable housing.