The 4 Keys to Doing Commercial Real Estate Business With HUD

Apartment construction and occupancy rates are up in many cities across the U.S. In some regions the multifamily market is actually outpacing the still-recovering single-family market. It is no surprise that the U.S. Department of Housing & Urban Development’s (HUD) mortgage insurance commitment authority exceeded approximately $25B in FY2013. These facts betray the reluctance of many in the multifamily community to do business with HUD.

Several misconceptions linger regarding transacting business with HUD. Yes, HUD is a government bureaucracy and any bureaucracy has its own unique idiosyncrasies. HUD is no different. Understanding the cultural norms of HUD is critical and in some cases might mean the difference between consummating your transaction and having it stall needlessly.

There are a few things of primary importance any developer or lender should know in order to get your HUD deal approved. These guidelines are generally applicable to most HUD transactions, including new construction and refinance loans, as well as transfers of physical assets assumptions (TPAs). Here’s what you need to know:

  • Speak to HUD in advance

Schedule a pre-application meeting with HUD’s multifamily staff in the office where your deal will be submitted. It is advisable to consult with the person in charge of the multifamily portfolio (often called the Housing Director of Multifamily Hub Director), the actual asset manager in charge of a given property, and the government’s lawyer (HUD Office of General Counsel). Ask for a conference to discuss your project with these individuals, as they will have primary responsibility for approving or denying your application. Their buy-in is key to getting your deal done.

It is not uncommon in such meetings for HUD representatives to unearth potential problems with your transaction. For example, if you are acquiring a property through a refinance loan or a TPA, HUD might alert you to problems with the physical condition of the property that perhaps should be resolved before approval. In other instances, your proposed legal structure for the entity might be problematic, or the financing for the project might be challenging. HUD will normally apprise you early on as to any major issues with a deal; take their advice thoughtfully. In any case, walk them through the anatomy of the deal, get their reactions, and work to resolve any issues before you submit the application.

This seems elementary, but a surprisingly sizable number of applications are not processed due to incompleteness. Check all the boxes, get all the signatures, ensure documents are tight, and be forthright with HUD: trying to hide the ball is never a good idea. One of the most often cited reasons why developers avoid HUD mortgage insurance is the perception that the application process is intrusive, lengthy, and unpredictable.

Every HUD program carries with it a requirement that parties submit several documents, including organizational forms, and legal and financial documents. Most professionals who liaise with HUD will inform that while some information can seem unique to HUD, most of the documentation required is much the same as what you would submit in a conventional loan application. The volume of information HUD requires creates a temptation to omit some details of transactions; there is always a chance that HUD will not catch those omissions, but given the multiple internal reviews, chances are someone will catch it. The result, even when unintentional, is usually a higher level of scrutiny for a given deal.

  • Be responsive

After your application is submitted, HUD will respond with a list of deficiencies. This might be informal or formal, but however it is given, please respond timely. The nature of the deficiencies could range from omissions in the application to substantial problems with the application. In the case of omissions, HUD will normally provide an opportunity to cure those defects soon after submission. In the case where substantial problems exist, i.e. issues with the business structures, or one or multiple principals have had problems with HUD in the past which causes them not to pass a pre-clearance check, HUD might cease processing of the application and return it so that the parties can clean up those issues to then resubmit at a later date. This could cause substantial delay and ultimate denial of an application, depending on the severity of the matters involved. Whatever the issue, HUD will usually offer their feedback and when they do, be responsive. As time passes after submission, it is also advisable to make a habit of keeping in touch with them so that your application stays top of mind to HUD staff.

HUD transactions involve very particular knowledge and experience. It is virtually impossible to get your transaction closed without legal representation. HUD views most multifamily transactions as legal proceedings, oftentimes requiring a formal table closing in the relevant HUD office where the property is located. Lawyers for the government, lender, buyer and seller are usually present. Legal documents will be passed and signed, but long before sitting down at the closing table, lawyers will have performed most of the work of the transaction. This work involves the actual packaging of the transaction for HUD, but more significantly, complex negotiations with HUD staff after the package is submitted to get the government to ‘yes.’ You should not leave this to anyone but experienced HUD counsel with the know-how to work with HUD. Far too many developers depend on their general business or real estate lawyers to provide this service. The result more times than not is serious delays that ultimately are measured in real dollars lost.

Developers should not view HUD as an irritant, but as an appealing partner to get your project built or acquired. Loan guarantees of 35 years, non-recourse loans, low interest rates, and attractive loan-to-value ratios – all make for compelling reasons to tolerate a little extra paperwork.

Legal Issues: Finding the Right Attorney for Your Case

A legal advisor is mandatory for a layman, especially if the layman is dealing with lots of money. The legal matters concerning these loads of money may not be favorable for you if you are without proper legal knowledge, as the fine print in some of the paperwork might not be clear to your eyes. The legal advisor is not only skilled in providing technical support on your paperwork, but also will serve you in terms of representation when the muscles you have concerning legal cases bypass your ability. How then do you find such a lawyer?

Finding one good at his job

By now, you should be certain that the TV or the newspaper will not offer you the best information concerning the best person for the job. Therefore, rule out the possibility of picking the best representative from a TV ad or a newspaper. There is just not enough information concerning the most suitable lawyer here. The following may probably help:

1. Personal referrals

One of the most practical ways of starting your research is through friends and families. You can take this to a new level and be smart about it. Most women groups and meetings will have some great referrals about the best divorce attorneys in town, as they deal with this matter quite frequently. However, you ought not to depend solely on this method to acquire the information.

2. Online services

Quite a number of online services exist these days, and their main task is to see to it that the lawyers and potential clients meet at a single platform. In most cases, the search criteria will have a portal to insert your area of location, and your search will be narrowed down to where you reside or work. This way, you can get in touch with a number of lawyers and interview each one of them.

3. Business referrals

Some businesses are constantly involved in the legal system by virtue of the fact that they deal with many legal matters. With such exposure, you can approach one such player and ask for advise about the best people for the job.

4. Lawyer referrals

You can fish out the best attorney by visiting one of these referral services. Well established services showcase those that have been screened by the state and are considered the best in the area. Here you will find the finest and the best in the land. Some services just offer the list of those screened by the state, while others offer a list of those who are particularly qualified to handle a certain type of case.

The Bankruptcy Advice on How to Kill the Burden of Debts

How would you avoid bankruptcy, when you do not have any idea of how not to think of it as an option to debt issues? You have to take a good bankruptcy advice on this subject. First, it is very easy to get the advice, and second, the advice will help you get rid of the thought of filing a bankruptcy petition. The bankruptcy filing should only be done, if you have tried all the options for the debt help and they have not worked for you at any cost.

The bankruptcy advice against bankruptcy

Debt help in the form of the bankruptcy advice can be taken first from any lawyer who deals in this subject. If you are not able to find any lawyer, then the necessary thing to do is to get help from an accountant in bankruptcy. He is the right person to help you with the concept, to help you avoid the filing of bankruptcy, and to help you avoid yourself getting into more trouble already.

To get help, you should contact the many debt managers in the markets near your vicinity. They are also available online on the websites and the portals that are there for your help. The companies have different advice elements on the avoidance of bankruptcy and provide solutions in return. These solutions are much deeper and cheaper than filing bankruptcy.

Debt managers

Apart from that, they will tell you the consequences of filing the petition in court. One big disadvantage is related to the loans that you take. The loans mostly are taken on the basis of being unsecured. The bankruptcy claims can also be given to you only if you have some asset to claim. If not, then you cannot do anything about the fact that the creditors will be on your head for their money at any cost. Better are the options that buy you some time, and are availed through a third party’s help, i.e., the debt managers and the debt help companies.

Involving a legal entity between you and the creditors is going to be fruitful for you. The debt management plan and the debt consolidation options can help you to pay back the loans in time with the possibility that the creditors would never bug you again.

If you want to avail this sort of help for the easy solutions for the bad debts that you have to pay off, then you can either log on to the websites of the debt management companies where they have shown all the information on their services and tell how to file for their help online. Other than that, you can also log on to the many other informational websites like the blogs, the informational forums and portals that help you with every kind of information on the subject and how to avail the options.

You can also get online to the user review sections of the websites where the past users of such options have uploaded their experience stories. You can take help from them and then you will be able to know how, and what help you can avail for the best possible results.