At NAA/NMHC’s urging, HUD/FHA has issued guidance as part of a Q&A document to its field staff clarifying its refund policy on withdrawn applications. The move is part of a broader effort to improve transparency and loan processing as FHA struggles to keep up with historically high demand for multifamily loans.
Under the policy, if an application is withdrawn prior to HUD screening it for completeness and eligibility, the total fee can be refunded. If an application has been screened but there was no further processing, HUD will refund 75 percent of the fee. If the application has started technical processing, no refund is available. Field staff can request an exception, where warranted, from HUD headquarters.
The refund policy offers relief to developers who have identified alternate financing sources but does little to address the overload issues at FHA. NAA/NMHC and a coalition of organizations continue to meet with HUD on this topic. A March 2 meeting with Deputy Assistant Secretary Carol Galante examined loan processing, FHA resource allocation and data transparency. HUD has engaged McKinsey & Company to recommend processing improvements, and they are currently reviewing an initial assessment.
FHA reported that it has temporarily reallocated staff to offices with the greatest demand, and they have established an improved application monitoring system to better assess and address their loan application pipeline. They reiterated that they will not change their requirements that any loan with more than 150 units or $15 million in loan proceeds go through a central loan committee review, a requirement NAA/NMHC has identified as exacerbating the bottleneck.
NAA/NMHC submitted a statement for the record for the hearing.