(go to previous page) (go to next page)
3. Provide full disclosure
There is no such thing as too much information when it comes to compiling a bulletproof application. Lenders can’t help you and your client address and overcome a problem if they don’t know about it. HUD’s processes are so thorough that you can be sure everything that needs to be known will be at some point.
It is far better to communicate issues like low credit scores, defaults, title challenges, pending judgments or suits, and environmental concerns to the lender than to try to hide them. When they inevitably surface in the submission process, it can hurt the deal.
4. Set goals and communicate
The lender’s team should establish a timetable for borrowers that illustrates how the deal likely will progress provided that the borrower, underwriting team and all third parties are responsive throughout. Because of the number of parties involved, a slow response to the lender’s information request can result in delays in various parts of the application — from the appraisal and environmental study to the overall application assembly.
Failure to promptly respond to HUD information requests almost always results in a delay in the application submission as the agency effectively “stops the clock” on application processing until they are addressed. In some cases, HUD may even return an application to the lender if they are unable to produce the required information because of a lack of response from the borrower or its principals.
People have busy lives and your lender team should understand this. Communicate available times that work for you to manage routine updates and set aside enough time to respond to information requests.
5. Find partners
Given the recent flurry of interest in HUD loans, it’s not only borrowers who are new to the agency’s application process. Lured by the increase in loan commitments, plenty of lenders have jumped on board with HUD in recent months, and few of them have extensive experience with its loan programs. A lender that is a jack of all trades may be good at providing lending options, but closing deals is what counts. Knowing what to expect from HUD to ensure borrowers are prepared in advance is critical for a smooth transaction, as is working with the right partners along the way. It is much better to find a third party that specializes in HUD loans than one that doesn’t but may be cheaper.
The results can be tough to swallow when your partner tries to cut corners or isn’t prepared for the rigor which HUD brings to its processes. For instance, an engineering company might exaggerate estimates for the useful life of a building to lower a borrower’s reserve requirements, only to see the borrower blanch when HUD’s review increases those reserves based on its own analysis. Or a borrower risks having a property’s valuations reduced after submission when an appraisal company isn’t aware of ineligible sources of other income.
HUD is familiar with the work of the most reputable companies, and when you partner with one of them, it tends to reduce questions that might otherwise arise. The more thorough your lender and involved third parties are, the quicker HUD will issue a firm commitment that is consistent with the original application.
Inexperienced or ill-informed market participants have made the HUD process seem unnecessarily complicated. It doesn’t have to be. Every transaction has twists and turns, and not every contingency is known going in. But when the right team is in place, these hiccups are just part of the process and can be managed easily. Knowing what to expect is half the battle; the rest is up to us.
Adrian Hartman is a director of originations in Love Funding’s St. Louis office. In his previous position as vice president and senior underwriter, he closed more than 30 multifamily and health-care transactions with loan proceeds exceeding $200 million.
Hartman has served on numerous loan committees, acted as mentor to underwriters and assisted in expanding the depth of the underwriting team. Reach him at email@example.com or (314) 512-8736.
Page: 1 2 Previous