What is HUD LEAN Processing?
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Developed in 2008 based on Toyota’s model of operations, Lean is a methodology for processing HUD 232 applications. The goal is increased efficiency of the FHA 232 application process by reducing waste. Before the existence of the HUD 232 LEAN program, the local HUD Field Office processed loans under MAP (Multifamily Accelerated Processing) or TAP (Traditional Application Processing). Lean Processing is only for HUD/FHA 232 applications, while Non-232 loans are still processed by MAP or TAP.
LEAN (or simply Lean), contrary to popular belief, is not actually an acronym, but a method of processing HUD 232 applications. According to HUD, the HUD 232 LEAN process, “employs standardized work products and processes to obtain a consistent, timely result.” This is accomplished by greatly reducing paperwork and heightening data collection efficiency.
HUD's LEAN Process
Some of the main "LEAN" changes over the previous method are:
- Standardized checklists, certifications, statements of work for third-party work, and lender templates for the application package.
- Standardized punch-lists used by HUD staff in underwriting.
- The removal of duplicate and unnecessary portions of the application process and requirements. For example, closing-related documents submitted with the Firm Application don’t need to be submitted later in the process as well.
- Revised third-party appraisal requirements. Lean appraisals are market appraisals eliminating the need to use HUD forms.
- No proprietary earnings carve out.
Related Questions
What is the difference between HUD LEAN and FHA loans?
HUD LEAN is a streamlined method of processing HUD 232 applications patterned after Toyota’s operational processes. This program has been able to significantly reduce processing times. As a result, some HUD 232 loans can take as little as 4 months to close.
FHA loans are loans that are insured by the Federal Housing Administration. These loans are designed to help low-income and moderate-income borrowers obtain financing for the purchase of a home. FHA loans have more lenient credit requirements and lower down payment requirements than conventional loans.
The main difference between HUD LEAN and FHA loans is that HUD LEAN is a streamlined method of processing HUD 232 applications, while FHA loans are loans that are insured by the Federal Housing Administration.
What are the requirements for HUD LEAN processing?
The HUD LEAN process has instituted changes in order to reduce approval times, including:
- Forms, including lender templates, certifications, and other documentation, are standardized
- In most cases, duplicate forms and submissions are not required
- LEAN applications are not submitted by borrowers; instead, they are submitted by lenders directly to the OCRF (HUD's Office of Residential Care Facilities)
- HUD LEAN processing does not require propriety earning carve-outs
For more information, please see the following sources:
What are the benefits of HUD LEAN financing?
The HUD LEAN program is a streamlined method of processing HUD 232 applications patterned after Toyota’s operational processes. This program has been able to significantly reduce processing times, allowing some HUD 232 loans to close in as little as 4 months. Additionally, HUD LEAN financing offers extremely high leverage, with loan-to-cost ratios of up to 85% for market-rate properties, 87% for properties with an affordable housing component, and 90% for subsidized housing developments.
How long does it take to process a HUD LEAN loan?
The HUD LEAN program is a streamlined method of processing HUD 232 applications that can significantly reduce processing times. According to the Terms, Qualifications, and Guidelines page on HUD232.loans, typically the firm application is submitted within 60 days of initial engagement with HUD and LEAN transactions for FHA 232 loans usually take four to six months from application to closing. Additionally, according to the HUD 232 LEAN Loans page on Multifamily.loans, the processing time varies depending on a number of factors including the application’s complexity and the receipt of required information.
What documents are required for HUD LEAN processing?
For HUD LEAN processing, documents required include lender templates, certifications, and other documentation. These forms are standardized and in most cases, duplicate forms and submissions are not required. Source
In addition, LEAN applications are not submitted by borrowers; instead, they are submitted by lenders directly to the OCRF (HUD's Office of Residential Care Facilities). Source
HUD LEAN processing does not require propriety earning carve-outs. Source