FHA Deal Accelerators: Embrace the Bureaucracy

In my conversations with lenders, borrowers and attorneys about closing loans through the U.S. Department of Housing and Urban Development (HUD), a recurring theme is the lack of clarity about where HUD is at any given time in its due diligence. In the aftermath of the Office of Multifamily Housing's transformation, regional and satellite offices have become large processing centers, making it challenging for program participants to know where their deal is in the assembly line. The same can be said of HUD’s Office of Residential Care Facilities (ORCF), whose decentralized structure can subject a single deal to touch points in Washington, D.C., Seattle and various places in between.

Having held a key position inside HUD’s workflow system for over a decade, I can offer a few pointers on how to navigate the bureaucracy and keep your loan sailing toward endorsement.

1. Get an Organizational Chart

As a starting point, ask the HUD closing coordinator assigned to your deal for an organizational chart covering whichever HUD office you’re dealing with. If you’re working with a satellite office, ask for an organizational chart for the relevant regional office as well. The charts allow you to see who reports to whom and can be useful when you see unfamiliar names copied on emails from the closing coordinator. And when a deal stalls, the charts may offer some clues as to which HUD employee can assist (more on that in No. 6 below).

2. Get to Know the HUD Staff Before There’s an Emergency

Whenever a firm commitment hit my desk at HUD, I would appreciate it when someone representing the lender called me and brought me up to speed on the deal basics and the proposed timeline for closing. Starting the relationship on the right foot – in a spirit of partnership and collaboration – went a long way in terms of building a reserve of goodwill. By contrast, on those transactions where I never spoke with the parties until there was a crisis, I felt a lot less motivated to push for a quick resolution. I know that most of the closing coordinators I worked with at HUD felt the same way.

3. Respect the Closing Coordinator’s Role

The closing coordinator is supposed to be the HUD program office’s single point of contact with the lender and borrower from commitment to closing. If you make a habit of reaching out directly to the HUD staff working behind the scenes on your deal (e.g., the construction analysts, underwriters, et cetera), you risk alienating the closing coordinator, who ultimately has more control over the closing process than anyone else at HUD. Stay on the closing coordinator’s good side by respecting his or her role as HUD’s primary gatekeeper. Just be patient – most of the coordinators I’ve worked with are shouldering massive workloads.

4. Use Other HUD Offices as Reference Points

Embracing the HUD bureaucracy to speed up closing sometimes involves mentioning HUD offices other than the one you’re currently dealing with. If the HUD office in Minneapolis is handling a given issue differently from the office in Fort Worth, Texas, you should let Minneapolis know about the discrepancy. But proceed with caution: If the full extent of your argument is “Fort Worth let us do it this way,” be prepared to get shot down. The HUD staff in Minneapolis needs to understand the underlying business or legal reasons for your proposed course of action. After all, Minneapolis is not bound by Fort Worth’s decisions!

5. Assert Your Right to Know Where the Bottleneck Is

Program participants who honor the closing coordinator as the central figure on HUD’s team should expect to see that respect reciprocated in the form of clear and frequent communication on the status of HUD’s review. If you submit draft documents and get two weeks of radio silence in response, you shouldn’t hesitate to inquire as to where in HUD’s system the documents are stalled. The federal government is legally required to be transparent in its dealings with the public – the Freedom of Information Act (FOIA) is the relevant statute – so if you aren’t getting straight answers from the closing coordinator on which HUD employees haven’t completed their reviews, insist on clarity.

6. Elevate the Matter (As a Last Resort)

If, after repeated attempts, you still feel like you’re in the dark as to what’s happening with your transaction, make use of that organizational chart to contact the relevant HUD employees (copying the closing coordinator) or the branch chief directly. Yes, I know, this appears to contradict my advice in No. 3 above, but sometimes patience and respecting the role of the coordinator will only get you so far.

The same advice applies to interactions with the HUD closing attorney. If communications break down, you’re within your rights to elevate the matter to the associate regional counsel, chief counsel, or regional counsel, as the case may be. You can easily get contact information for managers in HUD’s Office of General Counsel (OGC) with a Google search.

Do you risk burning bridges by following this advice? Perhaps. But bear in mind, you are paying HUD considerable sums of money to process your deal, and responsive customer service is a reasonable expectation, even if HUD has lots of competing work. You can mitigate the risk of a burnt bridge by elevating only as a last resort and doing so with the utmost diplomacy.

Here’s the moral of the story: If you’re looking to add velocity to your Federal Housing Administration (FHA) closings, embrace HUD’s bureaucracy as an essential (albeit clunky) tool for removing transactional obstacles.

In your quest to minimize the time between firm commitment and closing, your relationship with HUD counsel plays a critical role. This series offers practical tips from a former HUD attorney for managing that relationship, making the HUD attorney’s life easier and boosting the speed of review so you can quickly close the deal.