FHA Nonprofit Approval
The scrutiny over FHA nonprofits has been ever increasing over the past decade and particularly the past two years. Many companies have sought nonprofit status as a means to participate in FHA nonprofit programs. The problem is that these FHA nonprofits have (at times) paid large salaries in the millions of dollars to the owners of the nonprofit organization. This author does not feel that such large salaries are consistent with the nonprofit status and surely FHA is in agreement with this authors view regarding FHA nonprofits. So without further ado, let’s look at what FHA has to say about FHA Nonprofit approval for single family homes. The following is from HUD’s website regarding FHA Nonprofits:
HUD issued two mortgagee letters (ML) relating to nonprofit programs, ML 01-30 and ML 02-01. Some instructions in 01-30 and 02-01 supersede the instructions in ML 00-8.
Copies of these and other HUD mortgagee letters can be obtained online. (ML2002-01 users please note: The addresses for the Denver Homeownership Center and the Santa Ana Homeownership Center have recently changed.
In addition, HUD published “Nonprofit Organization Participation in Certain
FHA Single Family Activities; Placement and Removal Procedures” on 06/06/02. This Federal Register notice provides information to nonprofit agencies seeking FHA approval.
All of the above publications tell nonprofits how to become FHA-approved to:
1. Act as a mortgagor using FHA mortgage insurance
2. Purchase HUD homes at a discount
3. Provide secondary financing; See “Application information for secondary financing/downpayment assistance providers.”
Important - Please Read This Entire Statement:
For New Applicants: HUD is in the process of transitioning to an on-line application system for Nonprofits applying/re-certifying for approval to participate in FHA activities. Starting August 15, 2007 all new Nonprofits that want to obtain HUD approval to participate as a FHA mortgagor, purchase HUD Homes at a discount, or administer a Secondary Financing/ Down Payment Assistance Program must submit an e-mail directly to their local Homeownership Center (HOC), Program Support Division, indicating that your organization would like to apply for approval to participate in FHA Nonprofit activities. The e-mail must also include the following information: your organization’s legal name, address, and executive director’s name and contact information (phone number and e-mail address). Additionally the e-mail should indicate whether the organization is a nonprofit or instrumentality of government, the date of your organization’s 501 (C)(3) determination letter and whether your organization has a minimum of two years, within the last five years, of housing development experience. Housing development experience is defined as acquisition, rehabilitation, and sale to low-to-moderate income persons. This e-mail should be sent to the appropriate HOC contact below. After your e-mail is received, HUD staff will send your organization an e-mail with instructions for accessing the on-line application system and a password and user ID.
For Re-Certifying Applicants: Nonprofits that need to re-certify, must submit an e-mail to the local HOC stating that your organization would like to apply for re-certification and request a password and user id. After your e-mail is received, HUD staff will send your organization an e-mail with instructions for accessing the on-line application system and a password and user ID.