HUD Form 2350 is Required for Most HUD Multifamily Transactions
During the HUD multifamily loan application process, borrowers will have to submit a variety of different types of documentation to HUD. One of the most important parts of this process is the submission of HUD Form 2350, which details a borrower/principal’s past participation in any HUD multifamily projects, as well as any participation involving other housing agencies. The goal of this process is to ensure that potential borrowers have acted responsibly in the past, and are good candidates for FHA-insured multifamily financing.
In order to automate the submission and review of these forms, HUD created the Active Partners Performance System (APPS), an online portal designed to streamline the completion of this review process. In general, borrowers who have not had previous involvement in government multifamily lending or loan insurance programs will not have to go through most of this process, they will simply have to enter basic information into the system to create a baseline profile.
When is HUD Form 2350 Required?
HUD Form 2350 is not only required for borrowers who are taking out new HUD financing; it is also required for a variety of other administrative purposes, including:
Borrowers who are taking a new role in a project
Housing Assistance Payment (HAP) contract assignment or assumption
Interest reduction contract assignments
Participation in HUD/HFA risk sharing programs
Transfer of physical assets
Green Retrofit Program
Reservation of funds for assistance payments
Assumption of Rent Supplement Contract
Assumption of Rental Assistance Payment Contract
New facility operator/management agent
How Do HUD Multifamily Borrowers Use the Active Partners Performance System (APPS)?
Through APPS, a borrower or related principal will need to either list themselves as an individual, or as an organization (or, in most cases, both). They will then have to detail their participation in all HUD/FHA and state and local housing finance agency projects over the last 10 years. This includes the status of all loans and physical inspection scores for all properties they were involved with. It also includes management ratings, if these were provided.
In addition, borrowers/principals and management agents will need to enter information about the current property they are working on or are requesting assistance with (in the form of mortgage insurance commitments, asset transfers, or otherwise). They will also need to enter when organizational changes occur in a borrowing entity, such as the addition or removal of a principal. This will include their specific role in the entity and their percentage share of ownership in the property. While all changes must be listed, only major changes require HUD review. These include any changes involving a Limited Partner, General Partner or Managing General Partner, or changing an LP or member’s ownership share to more than 25% or a regular shareholder’s ownership to more than 10% of the borrowing entity.
Additionally, it should be note that, in many cases, in order to change the ownership percentages of principals or shareholders, a Modified Transfer of Physical Assets (Modified TPA) form will need to be submitted to HUD for approval.
Entities that are currently flagged for non-compliance may show up on the list of excluded parties, or, in somewhat more serious cases, may appear on the list of Limited Denials of Participation (LDPs).
A detailed guide to using the Active Partners Performance System (APPS can be found here.
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