FHA Deal Accelerators: Practical Advice From a Former HUD Chief Counsel

In your quest to minimize the time between firm commitment and closing, your relationship with U.S. Department of Housing and Urban Development (HUD) counsel plays a critical role. This series offers tips for making the HUD attorney’s life easier and boosting the speed of HUD’s review, allowing you to quickly close the deal and move on to the next one.

Accelerator #1 – Consolidate Before Clicking “Send”

In my 14 years as a HUD closing attorney, I saw plenty of deals languish between commitment and closing. I could probably fill a couple of notebooks describing the causes, many of which related to my own missteps. But I’d attribute a high percentage of those slow-moving deals to factors within the control of lenders and borrowers.

What would you guess was the No. 1 momentum killer?

A. Quibbling over the fine points of the Opinion of Borrower’s Counsel.
B. Lengthy negotiations with subordinate lenders or commercial tenants.
C. Getting changes to standardized documents approved by HUD headquarters.
D. None of the above.

The answer is D, “none of the above,” although options A, B and C were common culprits as well (more on them in subsequent columns). The most common cause of a deal succumbing to inertia had nothing to do with legal nuances and everything to do with workload management – namely, failure to consolidate.

Let me unpack that a bit. Failure to consolidate typically was not a problem when it came to the initial submission of draft documents. The problem of piecemeal submission usually arose after I sent out my initial written review of the drafts. Here’s what a typical exchange looked like:

• Day 1: Receive drafts from lender’s counsel.
• Day 3: Send written comments.
• Day 15: Receive revised drafts responding to roughly 75% of my written comments.
• Day 16: Refamiliarize myself with the deal, review the incomplete response and resend 25% of my previous comments.
• Day 23: Receive another set of revised docs responding to the last 25% of the deal.
• Day 25: Refamiliarize again.

And so on until we reached closing.

As you can see, efficiency started to break down around Day 16, when I not only had to brush up on the deal after a two-week break, but also send a second set of comments reiterating my previous comments. Then on Day 23, I was brushing up yet again before I could tell the HUD closer that Legal was ready to close.

In this age of distraction, there’s been a lot of research about the drawbacks of task switching. According to the American Psychological Association, each time we switch between tasks, we burn extra mental energy reorienting our brain to the new goal. This results in slower processing times and greater potential for error. If the HUD closing attorney reviews multiple submissions on a single deal because the revisions weren’t consolidated, that’s adding unnecessary task switching to their workload. And instead of racing toward closing, the deal loses tempo.

To make matters worse, submitting separate batches of drafts on a closing has a negative impact reaching beyond that deal. HUD attorneys are generally working toward several closings at once. If they’re regularly picking your package up and putting it down as scattered emails hit their inbox, that reduces their bandwidth to manage other projects. In this way, failure to consolidate is the secondhand smoke of real estate transactions!

Fortunately, this is a problem with an easy fix. Simply wait until you have 100% of what the HUD attorney requested before clicking “send.” Resist the temptation to send revised loan documents while waiting for an updated survey, pro forma title policy or UCC search. Feel free to let HUD counsel know how things are progressing so your deal doesn’t fall off the radar, but don’t make them chronic task-switchers by submitting stray documents here and there.

I know this is not new advice for most of you, but the virtues of consolidating are easy to lose sight of when you’re shepherding multiple deals through HUD’s pipeline. Just remember: Piecemeal is poison. Consolidation is king!