Issue link: https://read.dmtmag.com/i/100911
DEVELOPMENT MARKETING Our Public Servants? BY ED HICKS For over 15 years now, as a consultant and mortgage broker, I have been assisting community owners and developers with financing and refinancing their m/h land lease communities, primarily using the little known FHA207m loan guarantee program. So far, I have obtained approvals from 15 applications of which resulted in 12 new communities. Another two have recently been approved for refinance and rehabilitation. Two have been summarily rejected by two separate HUD offices with insufficient justification. This little used HUD multi-family program, which has been active in it���s present form for over 36 years, has been successfully used in many parts of the country. Funded by private lenders, it provides for up to 90% of the cost of new development or pays off the debt on existing communities plus advances up to 90% of any costs of rehabilitation. Unique features of the program is that it provides for up to 40 year loans, at fixed rates, which are non-recourse to the borrower. Interest rates are very low: right now (Jan 2013) they are sub 3.0% not including the 0.45% mortgage insurance premium. There is a 10-year deceasing prepayment penalty, and a 1.0% fee for transferring the asset to a new, qualified borrower. What���s not to like about the program? They can take a few months for funding than a commercial loan. Approvals may take 6 months or longer after being invited to submit an application by the HUD staff. Other than that, the program allows the operator to charge whatever monthly lease payments they wish, recognizing that the loan maximum amount will be based on the required market study and loan underwriting terms. They don���t tell you to whom you may lease home sites, but you must be in compliance JANUARY 2013 18 THE JOURNAL with local, state and Federal fair housing laws. So what���s wrong? Our pubic servants are what���s wrong! Although many of the HUD offices are willing to process these loans in the multi-family side of HUD, there are a few renegade offices out there which have taken it on them selves, in spite of the fact that it is a legal program and is an active program, to decide to delay to death or simply reject any applications for financing manufactured land lease communities. Who says some of the HUD staff in a few offices are allowed to self censure manufactured housing communities? Most of these prejudiced offices won���t tell you outright and forthrightly that they don���t intend to give any manufactured housing project loan guarantees, no matter how qualified the project is. Instead they will delay, delay, delay and even send it to another office which is very adept at making up reasons for turning down a project. Woe be to the applicant who spends their time and hard earned money to go through the application process, just to be turned down by a bunch of lazy, uninformed, bureaucrats. Mind you not all staff members are guilty of this, but there are enough to cause some concern by many industry members. I have heard ���its in the wrong part of town���, ���we doubt the project will create enough income to support the loan��� (not withstanding the 3 year history of the project is currently providing way in excess of net operating income to support the proposed loan), ���if you persist in trying to setup a meeting with our staff, we���ll send you to an office which will clearly turn you down, even for a concept meeting���, and other nonsensical and specious reasons. It is my opinion that one of the problems is: they are just to lazy to do their job and learn about manufactured housing land lease communities work. Not understanding that, they are afraid they may make a mistake in their underwriting, incurring the wrath of management for a failed community. Another reason may be: since the loan applications for mortgage insurance are underwritten by the HUD staff under the provisions of the TAP process (Traditional Application Process), which means they have to do all the hard work themselves and not leave it to the lender under the MAP (Multi Family Accelerated Process) where the lender does all or most of the underwriting, they may be even lazier still. Most lenders now will even do a modified MAP underwriting, but some of the staff are too lazy to even use this procedure. Will educating the HUD staff help? Right now, the industry is badly in need of some new community development. The FHA207m loan guarantee program funded by private lenders who are willing to make the loans, is a valuable resource for developers. It also can be an excellent source for refinancing many of the existing communities whose conduit loans and other non-recourse commercial loans are coming due. At a time when the industry is poised to take advantage of our unique ability to produce lower cost, quality, safe, functional, attractive homes to the American public, isn���t it time for our public servants to start doing their job? T J Edward Hicks, Lic Mortgage Broker, Lic. RE Broker, 45 years as m/h modular retailer, manufacturer, developer, and consultant to the m/h industry. 813 300-6150 www.mobilehomepark.com, www.factorybuilthome.com, www.fha207m.com