Do nonprofits assisting with a Governmental Entity's secondary financing assistance program require FHA approval?

When a Governmental Entity uses a nonprofit to assist in the operation of the Governmental Entity’s secondary financing assistance programs, FHA approval and placement on the HUD Nonprofit Roster are not required so long as there is a documented agreement indicating:
(1) the functions performed include the Governmental Entity’s secondary financing program, and
(2) the secondary financing legal documents (e.g., Note and deed of trust) name the Governmental Entity as the Mortgagee.
 
Governmental Entities that have nonprofits close the secondary financing in the name of the nonprofit must verify that the nonprofit is both FHA-approved and on the HUD Nonprofit Roster.

For additional guidance and clarification on the provision of down payment assistance through secondary financing please refer to HUD’s Interpretive Rule, Docket No. FR-5679-N-01, at https://www.hud.gov/sites/documents/5679N01FHAMINCAINVESINTER.PDF
 
The HUD Nonprofit Roster is available at https://entp.hud.gov/idapp/html/f17npdata.cfm 
 
For additional information see Handbook 4000.1 II.A.4.d.iii.(J)(1)(b); II.A.5.c.iii.(J)(1)(b); I.B.4.a.ii; and I.B.4.a.iii.(B) available at https://www.hud.gov/program_offices/administration/hudclips/handbooks/hsgh
 

All policy information contained in this knowledge base article is based upon the referenced HUD policy document. Any lending or insuring decisions should adhere to the specific information contained in that underlying policy document.


Topic Number: KA-04421