A couple of years ago, a developer went into an FHA office and pitched a deal to the staff. This deal had the American Flag all over it-affordable, public good, a novel approach to handling foreclosures-something you would want to sing God Bless America over. The staff applauded his initiative and encouraged him to the extent they could, saying something like, “this is the kind of deal we should be doing”. Nothing formal took place, just a happy meeting. Nothing was in writing.
3 months later and the process had changed. These type deals were not even on FHA’s radar and the requirements had changed. No big deal except the developer, in the glow of the meeting, had spent several hundred thousand dollars in due diligence on a program FHA could no longer deliver.
The reverse was often true for FHA staff, when a deal from out of nowhere would show up on their desks for a firm commitment. They had perhaps never spoken with the owner, or maybe even the lender, about the deal, and whether it met the current FHA criteria in that office. This could get very uncomfortable for FHA staff.
The result? We now have Concept Meetings.
Concept Meetings are structured discussions of the proposed loan, either new construction or refinance/purchase money mortgages. The outline for the package to be sent to FHA is detailed and is included hereafter.
This gives the owner and lender the opportunity to deliver as detailed as possible preliminary look into their current thinking about a deal. FHA is given the opportunity to review, make notes and explore possible problems or improvements to a transaction prior to a meeting or a conference call.
A Concept Meeting rarely lasts longer than an hour but gives each side the opportunity to discuss the merits and obstacles to a transaction. It is not only the time to pitch your deal but it is also a time to learn how to improve the transaction and perhaps speed the approval process, as you make the deal more like something FHA wants to see. Staying within FHA’s parameters is often the best way to move your deal forward. Finding out what they want and don’t want is valuable information for moving a deal forward.
Sometimes, FHA flat out doesn’t want the deal. The 5 day period following the meeting gives them an opportunity to reflect on the transaction and maybe tailor conditions to any approval. It certainly gets you out of the room and avoids any conflict that might happen around the table.
While the process adds time up front, it can save money and time on the back end as each side gets a clearer picture of what to expect. Getting FHA’s encouragement to proceed in writing is also a big help.
Overall, it has been a valuable and cost saving addition to the process, even if it sometimes slows a deal down.
Table of Contents
- Section of the Act
- Number of market rate and affordable units
- Projected mortgage amount
- Basic information on developer and principals
- Management company
- General Contractor
- Previous HUD experience
- Geographic location with map
- Photographs of the subject and immediate surroundings
- Site improvements (existing/proposal)
- Commercial component – discuss potential tenants
- Community / city / state support
- Green / Sustainability Issues
- Development status
- Discuss general market conditions, competitive properties and comparables
- Environmental issues
- Potential risks and mitigating factors
- Any anticipated waiver requests