What to Look for in a HUD Multifamily Lender

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What to Look for in a HUD Multifamily Lender

• Every experienced multifamily investor knows that
  most commercial mortgages run for a 10-year term
  with a balloon payment due at maturity. This sets
  the stage for needing multiple refinance
  transactions throughout the life of the loan
  until the property can be paid off, while
  continuing to generate maximum cash flow. The
  cost and amount of effort to refinance every
  decade can be a significant use of resources over
  the life of the mortgage.
• Look at recent history, and put yourself in this
  situation what if, in 2009, you had a mortgage
  refinancing come duewhen capital markets were
  frozen after the housing bubble burst, and the
  stock market collapsed? There were many investors
  who faced this situation and lost equity and
  their properties because of the economic
  circumstances, not through any fault of their
  own.

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The absence of forced balloon payments and
multiple refinancing are two of the most
significant financing benefits with HUD permanent
financing. Low interest rate Fixed interest
rate High-leverage debt Fully non-recourse Long-te
rm financing (up to 40 years) While it is true
that the application and approval process for
commercial HUD multifamily loans take longer than
with conventional banking, the upside of these
loans is all the more reason to consider their
benefits and a firm that is seasoned as a HUD
mortgager before selecting who youll work with
to secure your HUD financing. Focus of the
Firm Its no secret that many of the
HUD-licensed, MAP-approved lenders are actually
the biggest nationwide banks. What may not be
widely known, however, is the focus of those bank
lenders. Banks secure core deposits from their
clients for which they pay very low interest
rates. The banks primary focus is to sell bank
products that fund from their own deposits.
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Banks have a HUD desk at the bank because they
have clientele that absolutely require a HUD
loan, but their preference would be to sell their
customers a more profitable bank loan. An
independent, non-bank firm that focuses on
commercial HUD loans as their primary product is
better positioned to provide a loan that fits
better to a client needs, with the lowest fees
available, and without the balloon payment or
need to refinance. This delivers a superior
client experience. A Consultative
Approach There are many guidelines and
requirements that must be followed to secure a
successful HUD approval and funding. Having your
loan officer use a consultative approach is one
of many contributing factors that will provide
you with a satisfying client experience. A
developer often needs assistance in assembling
the right team, one that can secure a HUD
approval. The question to ask yourself is Dont
I want to work with someone who will analyze my
pro formas, test my conclusions and carefully
evaluate my plans, then offer me the best
professional advice that aligns with my needs?
You are entitled to this kind of experience as
you finalize the project and prepare for a
concept meeting.
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Ginnie Mae Issuer and Servicer When a firm is
authorized by HUD to service their loans, it
indicates that the firm has undergone a rigorous
process review and onsite auditing by HUD
personnel. Once a HUD loan is funded, the
mortgage is securitized by Ginnie Mae and the
security is sold from a single asset pool. Each
mortgage becomes a bond to be sold on the market.
A firm that is a Ginnie Mae Issuer handles this
process. Firms that do not issue the security
generally charge higher fees because they incur
an additional cost to contract with a firm that
can issue the security. To save fees and
eliminate extra steps, look for a firm that
originates, has in-house (local) underwriting,
will service your loan for the length of its
life, and place your securitized loan in the
Ginnie Mae market. Credit Committee Once youve
finalized your project, youll be required to go
through an underwriting review and be approved by
a credit board before you can apply directly to
HUD. The members of a banks credit committee are
nameless, faceless board members that make their
decision, from behind large mahogany doors, based
solely on the loan package and feedback from the
underwriter.
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At an independent firm, it is more likely that
the credit committee will consist of fewer people
who are accessible to the client before any
decision is made on your deal. In this
independent approach, you can request a meeting
with the members of the credit committee and have
the opportunity to connect with and impress them
with your resume and presentation as well as
respond to any questions they might
have. Commitment to Excellence When you contact
a potential firm, ask yourself the following
questions Was the person you talked to excited
to speak to you? Did they take a serious interest
in understanding all aspects of your project,
your motivation, your vision of the finished
project? Did they listen to every concern, answer
your questions, give you enough time to
completely understand your needs? Have you been
contacted personally by a member of senior
management who introduced themselves, assured you
of the firms commitment, and given you their
contact information in case you had any
unresolved concerns or questions? Do you have to
constantly chase after your loan officer to get
updates and move your deal forward? Or do you
feel like youre just one of many deals theyre
working on rather than an important client?
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If youre not experiencing some level of
red-carpet treatment, you probably should
continue your search for a firm that makes you a
priority. Remember, during the process of
securing financing for your project, you will
have multiple conversations and be working with
your contact for several months, and, on a new
construction project, it will be over the better
part of a year. Given the length of time and
importance of this relationship, you should work
with someone that is responsive, eager to earn
your trust and keep your business. To Know More
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