FHA Affordable/221(d)(4) Training Program Course 5

FHA Affordable/221(d)(4) Training Program

Course 5 Architectural, Engineering, and Cost (AEC) ReviewLessons 1 Architectural and Engineering Review

Copyright © 2021 Mortgage Bankers Association All rights reserved.

Mortgage Bankers Association 9/25/2021

Mortgage Bankers Association 1

Lesson Objectives

Upon completion of Lessons 1, you will be able to:

• Describe the role of the architectural and engineering third parties in the development project

• Identify common plan review issues

• Understand HUD Amendment to B108

2



Role of the Architectural and Engineering Reviewer

3

Poll Question

4



Role of the AEC Reviewer

Role of the Architectural, Engineering, and Cost Reviewer• Provide a review of the project and borrower deliverables• Serve as a guide and resource for the Project Team in

navigating the HUD MAP Guide and MAP process.• AEC Reviewer’s three main duties are:

1) Plan & Spec Review

2) Cost Review

3) Document Catalog Review (Lender Deliverables & Borrower Deliverables)

• Summarize findings of the review in a written report to assist the Lender and HUD in analyzing risks on the project.

Note: reviewers and inspectors are architects and engineers, or have been trained/educated as architects, engineers or building inspectors.

5



AEC Review

Communication with Lender and Development Team

• AEC Reviewer is hired by the lender and

• All communication should go through the lender

• Everything on AEC Reviewer’s checklist (a list of Borrower Deliverables) is on the Lender’s much larger due diligence checklist.

• Lender typically coordinates all documents from Development Team (sponsor and/or sponsor construction staff, project architect, general contractor) and forwards appropriate documents to AEC Reviewer.

• Lender schedules regular and recurring conference calls with AEC Reviewer and Development Team.

6



AEC Review


• Major items like plans and specs are often sent directly or coordinated with AEC printer.

• Time saver:

7

Then copy Development Team via email

or communication

memo

General Contractor speaks with

AEC Reviewer’s cost estimator

AEC Reviewer’s architect/plan

reviewer speaks with the

project architect



AEC Review


Note: Finalization of the architectural plans, specifications manual (spec book), and construction cost estimates are the longest lead time item and can drive the timing of the submission of the Applications.

8



Chat Question

When does the site visit/site inspection occur?

Type your response in the chat box.

9



AEC Review

When does the site visit/site inspection occur? Answers (from due diligence provider perspective)

New Construction – prior to issuance of A/E Report to Lender. Per MAP Guide ‐ The Lender’s Construction Analyst must have visited and inspected the site and its environs, investing time and attention to detail sufficient to allow the analyst to appreciate due diligence needs and to knowledgeably evaluate prepared due diligence and all design and construction documents.

Sub Rehab – As early as feasible. If not prior to Pre‐App, should be following Pre‐App prior to further due diligence or design work. A/E Reviewer needs a narrative scope of work at a minimum. Purposes of the Joint Site Inspection is to verify with the development team the rehab scope of work addresses the needs of the property.

10

Instructor Notes



AEC Review

Kick Off• AEC Reviewer leads the meeting with Development Team to:

• Outline role/responsibilities

• Timing of delivery of plans and specifications and construction costs

• Scheduling of Joint Site Inspection (if applicable – Sub‐Rehab only)

• Answer any questions lender/development team may have

11

Instructor Notes

Verifying the scope of work is really done on Sub-Rehab projects only and is a key function of the Joint Site Inspection – to make sure the scope of work meets the needs of the property.



AEC Review

Site Visit ‐ New Construction

• The site visit is used to:

• Review site and look for any issues for the proposed project

• Dumping

• Ponds and streams (wetlands)

• Utilities (availability)

• Power lines,

• Buildability of the site

• AEC Reviewer may inspect on their own to verify existing conditions.

12



AEC Review

Joint Site Inspection for Substantial Rehabilitations (Chapter 5.9.A.2)• Lender responsible for arranging.

• Should be scheduled as early as feasible and may follow the concept meeting.

• Required to establish a common understanding of the existing physical condition of the property and the necessary improvements to be addressed in the scope of work.

• Joint inspection memorialized by AEC Reviewer and Lender.

• Who attends?

• Lender’s underwriter or representative

• AEC reviewer

• Project architect

• General Contractor13



AEC Review

Timing of Specific Pieces of Review Process• Site visit requires coordination with Lender and owner for site access.

• For occupied projects, provide at least 2 weeks notice for travel prior to inspection.

• Receive borrower deliverable documents, review and either provide comments or approve documents in 2 to 4 days.

• Plans and Specs – Prefer contract drawings (CD) to be 80% complete or better (all disciplines)

• Prefer hard copies of plans and specs on first round, but can utilize Bluebeam for pdf reviews

• Initial review of CD’s is typically a 3‐to‐4‐week turn based on project size/complexity

14

Instructor Notes

Timing of the initial review of CDs reflects industry standard

Expedited processing can be discussed at engagement if there are any deadlines (mainly for mixed financing projects with LIHTC).



AEC Review

Timing of Specific Pieces of Review Process• Plan review letters (initial review by AEC

Reviewer) are sent with comments to Lender with Development Team copied or the Lender will distribute to the Development team.

• Project Architect provides responses via changes to individual architectural sheets and a response letter that addresses AEC Reviewer’s comments, typically takes 3 to 5 days depending on number of initial comments

Note: Lender should always be in the loop.

15



AEC Review

Project Architect Insurance Requirements

• Minimum expected is $1,000,000 in coverage but should reflect scope of the project

• Limited design professionals (landscape architect, MEP engineer, structural) could be less, but still recommended minimum of $1,000,000

16



AEC Review

Qualifying Architect and Design Professionals (Map Guide 5.2)• Resume & Experience – Interested architects and engineers

(civil, mechanical, electrical, plumbing, structural) provide a list of previous multifamily and/or HUD work to AEC reviewer.

• Design professionals inexperienced with HUD can be approved but can add significant delays to overall process if not amenable to doing things the HUD way.

• Helpful for AEC reviewer to know the level of the team’s experience as indicator of how much “hand‐holding” will be needed.

• Like‐kind design experience is crucial (garden style v. high rise).

• Licensing – Design professionals need to have a current registration and license; license needs to be for the person that will sign/seal the documents.

17



AEC Review

Deliverables for AEC Review

• Document Catalog (similar checklists for other third parties)

• Lender Deliverables list includes items in addition to Borrower Deliverables.

18



Chat Question

What is involved in the municipal review?


19

Instructor Notes



AEC Review

What is involved with the municipal review?

• Completed by the Authority Having Jurisdiction (AHJ)

• Includes the review of applicable design and construction documentation to approve development,

• Ensures that the development complies with local building codes and ordinances

• Issues permits required to commence construction.

20



AEC Review

Construction Documents – Plan Related Deliverables• Full sized hard copies of plans (or Bluebeam pdf’s) for initial review

• AEC Reviewer’s code analysis for the project

• Verification that the Project Architect reviewed and incorporated HUD’s Minimum Property Standards (MPS) for project (see MAP Guide Appendix A.5.1)

• Project Architect’s accessibility review for the project

• AEC Reviewer discusses HUD’s accessibility chart with Development Team so everyone is on the same page as to what applies and why (UFAS, Fair Housing, ADA 2010; no local or state exemptions)

• Discussion of HUD’s accessibility requirements should be done early in the process – e.g., at the kick‐off call scheduled by Lender or site meeting if Project Team is present.

21

Instructor Notes

Probably good to note here that detailed Firm Commitment Drawings and Specifications Requirements for New Construction and Substantial Rehabilitation are currently found in Appendix A5.5.1 of the 2020 MAP Guide



AEC Review – Accessibility Requirements

22

Activity&YearBuilt

MarketRateApartments

Affordable(notassisted,e.g.LIHTC’s)

FederallyAssisted3

Projects built for residential, 1st

occupancy2 after 3/13/1991

Fair Housing Act Requirements

Fair Housing Act Requirements

Fair Housing Act Requirements & Sec 504 (UFAS or Deeming Notice4)

Projects built from 7/11/1988 to 3/13/1991

None

None

Sec 504 (UFAS or Deeming Notice 4)

Sub-rehab or Refinance of projects built prior to 7/11/1988 or built prior to becoming assisted5

None

None

Sec 504 (UFAS or Deeming Notice4) (Load-bearing wall and financial/administrative burden exceptions)

All Public Accommodations (Designed and built for 1st

occupancy2 or altered after 1/26/1993

ADA Title III

ADA Title III

ADA Title III & Sec 504 (UFAS or Deeming Notice4)

State or Local Government Programs or Assistance, e.g., LIHTCs with construction start after 1/26/1992

ADA Title II6

ADA Title II6

ADA Title II & Sec 504 (UFAS or Deeming Notice4)



Common Review Plan Issues

23

Common Plan Review Issues

Common Plan Review Issues• Coordination of scope of work from:

• Must match across all three!• Accessibility and knowing which requirements apply and why

24

Narrative Plans Costs




Common Plan Review Issues• HUD does not permit the following statements in the drawings or specifications as they

cannot be adequately quantified, and the cost estimated.

• “or equals”

• “as necessary”

• “as needed” and/or

• “as required”

• “By others” (must know who is providing the work and if it is in the scope and budget)

• “Alternates” ‐ HUD will allow alternates, but alternates in the bidding process must be reviewed, approved and fully included into the final construction documents and pricing prior to approval.

25




Common Plan Review Issues• HUD requires that signature blocks must be provided on the first and last sheet of the

drawings for the:

• architect

• owner

• contractor

• contractor’s bonding company

• lender

• any other design professional that has a direct contract (AIA B108) with the owner

• HUD requires that the sheet titles, sheet numbers and dates shown on the Drawing Index match verbatim the sheet titles, sheet numbers and dates shown on the sheets themselves.

26





• The Drawing Index shall provide 2 dated columns:

• one for the original issue date of the drawings

• one for the date of each drawing that is revised, noting the latest revision or submission date

• Radon information missing – need to note requirements and have details for mitigation

• Coordinate the base plans between disciplines – often plans don’t match, including site

27




HUD requires that a dwelling unit distribution chart or graph be provided on the drawings. Information includes:

• Number of building/s and each building type

• Each type of apartment in the building/s – indicate accessible & sensory impaired units

• HUD net rentable square feet for:

Each apartment type

Project

• HUD gross square feet for:

Each unit type

Each floor of the building/s

Each building/s

Project

• Total gross square feet for:

Building/s

Project

28




Dwelling Unit Distribution Chart

29




Common Plan Review Issues (Cont.)• Label the HUD Net Rentable Square Footage and the HUD Gross Square Footage

and verify the following definitions are being used for area take offs.

• “HUD Net Rentable Square Feet” is defined as the paint‐to‐paint area of the inside face of the permanent wall of the apartment, including all interior wall of partitions.

• “HUD Gross Square Feet” includes the exterior face‐to‐face exterior of the building and includes unconditioned spaces associated with the unit such as garages or exterior storage closets, but does not include open quarters, breezeways, patios or balconies.

30



Other Documentation

31

Other Documentation

Construction Documentation – Specification• Must use Expanded CSI (Construction Specification Institute) format

• HUD requires certain forms and amendments to be bound in the specs:

• AIA A201 General Conditions of the Contract (coordinate with GC copy)

• HUD Amendment to the A201 – HUD 92554M, Supplement to Construction Contract

• Current Davis‐Bacon Wage Determination – must check for updates

• Geotechnical Report – coordinate with structural drawings

• Any Operations & Maintenance (O&M) Plans for hazardous material (asbestos‐containing material, lead‐based paint)

• Signature blocks, as on the architectural plans32

Instructor Notes

Contract Specification requirements are also noted in Appendix 5.5.1 (Section R).



Chat Question

What is the purpose of B108 & HUD Amendment to B108?


33

Instructor Notes



Other Documentation

What is the purpose of B108 & HUD Amendment to B108?

The AIA B108 (and the HUD Amendment to the B108 – HUD 92408-M) is the standard form of agreement between the Owner and Architect for building design and construction contract administration that is intended for use on federally funded or federally insured projects.

34



Other Documentation

B108: Standard Form of Agreement Between Owner and Architect for Federally Funded or Federally Insured Project

• HUD Amendment to B108 – Contract Review

• HUD Prefers to have single B108 or as few as possible (we do too!)

• Map Guide Section 5.2.3.2b

https://www.hud.gov/sites/documents/92408‐M.PDF

35



Other Documentation

HUD Amendment to B108 – Contract Review “Cheat Sheet”

36

Section Description

1.3 HUD recommends that “TBD” be used for all dates in this section…or

realistic dates

2.5 Professional Liability insurance is required, but all should be noted and

match ACORD

3.1 Architect to review paragraph to properly describe the services they are

actually providing

4.1 Optional Services table filled out for any services being provided by

architect, owner, or consultant

4.1.15 HUD requires As‐Constructed record documents (even if note GC)

4.3.3 Should note number of each architect will provide. Typical 2X/month

(draw & off‐draw)

8.2.4 Litigation box must be checked per HUD

8.3 Remove this entire section per HUD

11.1 Full fee (including consultants) to be noted. HUD requires fixed fee

(percentage fees not allowed)

11.3 Need dollar amounts and percentage (HUD requires 20% ‐25% allocated

for CA, even with multiple contracts total needs to hit the percentage

requirement as a total per scope)

Article 12 Add the following:

Architect to provide 9 and 12 month warranty inspections

Architect to maintain insurance through 12 month warranty

Additional services and reimbursable expenses are not to be paid from mortgage proceeds



Other Documentation

37

HUD Amendment:

• Items 12 and 13 must be filled in. They may not be left blank or note N/A.

• Item 12 must note if there is an IOI … if so, list it … if not then put NO.

• Item 13 must list an entity that is not the same as the owner listed on the B108 contract.



Other Documentation

Geotechnical Report Review

• Should note compliance with IBC (International Building Code) Chapter 18, specifically Section 1803 – Geotechnical Investigations

• GeoTech report must be included in specifications to ensure the Project Architect has reviewed and incorporated into the design.

• Special conditions or testing requirements/recommendations should also be noted in the specifications to be addressed during construction

• GeoTech report will discuss soil types, dumping, contamination, rock, openings, seismic classification.

38



Other Documentation

39

ALTA Survey & Surveyor Report Review:• ALTA should show existing conditions,

not new.• Report needs to be filled out, no

blanks or “see survey.”• Need proper HUD Certification on

the survey.• Every attorney in the process wants

to make a comment on the ALTA, best to collect comments and update prior to closing due to shelf‐life verses updating multiple times.

• ALTA survey sheet needs to be included in the construction documents plan package.



Other Documentation

Other Deliverables

• Project Architect’s Certification

• Utility letters – “Will serve” letters

• Environmental Reports, Phase I & HEROS, Phase II

• Wetlands – Is there 8 Step Process?

• Noise – STraCAT results if mitigation is required.

• Radon – What radon zone and is mitigation included in plans/specs?

40



Other Documentation

Other Deliverables• Reduced MIPs – Affordable or Green?

• Green MIP needs:

• Qualifications of green standard keeper –e.g., LEED, NGBS, Energy Star, Earthcraft

• Statement of Energy Design Intent (SEDI) report – need to check sq ft used

• Modeling – need to check for whole building modeling

• Data Collection Plan for future Statement of Energy Performance (SEP) yearly updates

• Milestone letter identifying steps/inspections during process

41



Other Documentation

Other Deliverables

• Reduced MIPs – Affordable or Green?


•SEDI with a score comfortably over 75

•Plan to secure their Green Certification (Project registered, scoresheet completed)

•CNA must specify ENERGY STAR appliances, HVAC or high perf option if ESTAR option isn’t available.

•HUD form 91070M “consolidate Certification‐Borrower” –applicant’s commitment to achieve green certification

42



Other Documentation

Other Deliverables• Reduced MIPs – Affordable or Green?


•HUD‐92466‐R‐5 Rider 5 – Regulatory Agreement – obligates the borrower to get the green certification and comply with the ongoing annual green benchmarking

•Data Collection Plan (PREPARED BY A QUALIFIED ENERGY PROFESSIONAL)

•Whole building path provided by utility or data loggers

•Dependence on tenants signing releases is heavily frowned on – too much risk that a few tenants won’t sign, property mgmt. could miss a signature or lose the paperwork, unit turnover could impact the ability to get the release and the data.

•No sampling is permitted

• Section 6.4.7‐6.49 – discuss the Design and Construction team qualifications ,Energy Professional qualifications

43



Disclaimer

This course is provided for educational purposes only. This course is not intended to provide, and should not be relied on for the provision of, legal advice. Please consult your own attorney or financial advisor for information appropriate to your jurisdiction or the specific facts and circumstances that may arise.

WHILE MBA TAKES COMMERCIALLY REASONABLE EFFORTS TO ASSURE THE ACCURACY OF COURSE CONTENT, MBA DOES NOT MAKE AND SPECIFICALLY DISCLAIMS ANY REPRESENTATIONS OR WARRANTIES, EXPRESS, IMPLIED, OR STATUTORY, INCLUDING (WITHOUT LIMITATION) ANY IMPLIED WARRANTY OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, NONINFRINGEMENTMENT OF THIRD PARTY RIGHTS, AND IMPLIED WARRANTIES ARISING FROM COURSE OF DEALING OR A COURSE OF PERFORMANCE. THIS COURSE IS PROVIDED ON AN "AS IS" BASIS AND MBA MAKES NO WARRANTY THAT ITS COURSE CONTENT OR MATERIALS WILL BE ERROR‐FREE.

44

