Previous Participation (2530) Review in HUD Lending

Key points

• The review is governed by 24 CFR Part 200, Subpart H, and applies to controlling participants, not passive investors.
• Specified capacities include the borrower, the owner if different, the management agent, the general contractor and foreign national principals.
• At least one natural person must be identified as a controlling participant for each specified capacity.
• Firm commitments can be issued conditioned on 2530 approval if there are no critical findings and flags can be resolved below the review committee level.
• Unresolved defaults, delinquent federal debt or existing APPS flags can stop a deal.

What the review covers

The MAP Guide states that individuals and entities in control of a project are subject to a previous participation review under 24 CFR Part 200 and must submit information on their previous participation in governmental housing transactions through APPS or form HUD-2530, or any successor system or form. The certification looks at experience with FHA-insured multifamily programs and USDA Rural Development multifamily programs, including defaults, claims, enforcement and physical or financial compliance problems. Each participant certifies personally as to their own record.

Who has to file

Controlling participants are the entities and individuals serving in a specified capacity, and those who control them. The specified capacities are the borrower entity; the owner, if different, for example in a transfer of physical assets; the management agent; the general contractor; and foreign national principals. Anyone HUD determines controls day-to-day financial or operational decisions must also file. The MAP Guide's list of those who must file includes:

• Officers and executive management of for-profit entities, and others HUD determines control the entity.
• The executive director or managing officer of nonprofit borrowers; board members without another controlling role are excluded.
• Tax credit syndicators or investors with an identity of interest in the general partner or managing member.
• Investors the borrower relies on for financial strength and cash, even with an interest below 25 percent (10 percent for corporations), and investors near the $500 million threshold in the rule.
• Foreign national controlling participants, who must register in APPS and use an SSN or EIN rather than an ITIN.

Timing, flags and conditions

Submissions can be made as early as the pre-application stage. HUD may issue an invitation letter or firm commitment conditioned on previous participation approval, as long as there are no critical findings and any flags can be resolved without going to the Multifamily Participation Review Committee. For 223(a)(7) refinances, the MAP Guide says applications should not be submitted until any required clearance is in place.

The lender's own credit review overlaps. Under the MAP Guide, the underwriter may not recommend a principal with a history of default without contacting the affected lender, and a principal should be a credit rejection if there is unresolved delinquent federal debt, significant judgments, a pending bankruptcy or insolvency, or a current APPS flag for FHA-insured defaults or other financial improprieties.

Planning the 2530 review in a bridge-to-HUD deal

The ownership structure used for a bridge loan often changes before the HUD refinance, with new investors, a different general partner, or a new management company. Every change in who controls the borrower or manages the property changes who must file. Owners should lock the HUD ownership and management structure early in the bridge term, get every controlling participant registered in APPS, and identify any past HUD issues so they can be explained or resolved before the firm application. A late change in a controlling participant after the firm commitment can require new clearances and delay closing.

Management agents need their own 2530 clearance, which is one reason a change of manager during the bridge period should be decided well before the HUD application.

Where to go next

For common questions about HUD borrower requirements, see HUD loan FAQ.

To discuss a HUD application's ownership structure with Bravo, use the Bravo loan inquiry.

Related guides: HUD Borrower Entities, Principals and Key Principals; Changing Management Companies before a HUD Refinance; The First-Time Borrower’s Guide to a HUD Exit.

Related terms: What Is a Key Principal in a HUD Loan?; Single Asset Entity: Why HUD Requires a Special-Purpose Borrower; Transfer of Physical Assets (TPA): How HUD Loan Assumptions Work; MAP (Multifamily Accelerated Processing): HUD Loan Glossary.

For portfolio figures by state, metro and program, see the HUD multifamily data hub. Bravo Capital’s record: all 26 HUD firm commitments received since April 2022 have closed, totaling $526.0 million (HUD Closing Scorecard).