FHA Single Family Housing Policy Handbook 4000.1, Part I — d. Post-approval Requirements (03/14/2016)

FHA Single Family Housing Policy Handbook 4000.1, Part I — d. Post-approval Requirements (03/14/2016)

d. Post-approval Requirements (03/14/2016) The Mortgagee must complete a series of annual certification statements that include the Mortgagee’s review of underwriter compliance with eligibility requirements. 4. Nonprofits and Governmental Entities a. Program Overview (01/24/2022) FHA requires all nonprofits to obtain approval and be placed on the HUD Nonprofit Roster to participate in FHA’s Single Family nonprofit programs. Nonprofits participating in one of FHA’s nonprofit programs must serve Low- to Moderate- Income individuals or families. Low- to Moderate-Income individuals or families refer to individuals or families whose household income does not exceed 115 percent of the median income for the area when adjusted for family size. FHA may approve a higher percentage of up to 140 percent. A request must be submitted to the FHA Resource Center at answers@hud.gov. i. Types of Single Family Nonprofit Programs (A) HUD Homes (1) Discounted Purchase Governmental Entities and HUD-approved Nonprofits are permitted to purchase homes from HUD at a discount. (2) Exclusive Listing Period Governmental Entities and HUD-approved Nonprofits are permitted to purchase Properties, without a discount, during the exclusive listing period for owner occupant purchasers. (B) FHA Mortgagor Governmental Entities and HUD-approved Nonprofits are eligible for certain FHA- insured programs under the same provisions as owner occupants. I. DOING BUSINESS WITH FHA B. Other Participants 4. Nonprofits and Governmental Entities Handbook 4000.1 87 Last Revised: 11/26/2025 HUD-approved Nonprofits are still required to obtain credit qualification from a Mortgagee for each Mortgage originated, and each Mortgage must be underwritten in accordance with Underwriting Nonprofit Borrowers (Manual). (C) Secondary Financing Governmental Entities and HUD-approved Nonprofits may provide secondary financing assistance to homebuyers utilizing FHA insurance on a first Mortgage when that assistance is secured with a second Mortgage or lien. Additional information on Secondary Financing can be found in the Origination through Post-closing/Endorsement section. ii. Entities Requiring Approval to Participate in FHA Nonprofit Programs (A) Nonprofits with 501(c)(3) Tax-Exempt Status A nonprofit organization must have 501(c)(3) Internal Revenue Service (IRS) tax- exempt status. When a nonprofit closes secondary financing in its own name, that nonprofit is required to be both FHA approved and placed on the HUD Nonprofit Roster even if the secondary financing will be held by the Governmental Entity. (B) Nonprofit Instrumentalities of Government (1) Definitions A Nonprofit Instrumentality of Government (NPIOG) refers to a 501(c)(3) organization that was established by a governmental body or with governmental approval or under special law to serve a particular public purpose or designated as an instrumentality by law (statute or court opinion). FHA requires the unit of government that established the nonprofit to exercise Organizational Control, Operational Control, or Financial Control of the nonprofit in its entirety or, at minimum, the specific homebuyer assistance program that is using FHA’s credit enhancement. Organizational Control refers to the majority of the governing board and/or Principal Officers that are named or approved by governmental body/officials. Operational Control refers to the requirement that the government body approves all major decisions and/or expenditures. Financial Control refers to the requirement that the government body provides funds through direct appropriations, grants, or Loans, with related controls applicable to all activities of the entity. I. DOING BUSINESS WITH FHA B. Other Participants 4. Nonprofits and Governmental Entities Handbook 4000.1 88 Last Revised: 11/26/2025 HUD-approved NPIOGs will be included on FHA’s Nonprofit Organization Roster. (2) Permitted Level of Secondary Financing Assistance FHA may approve an NPIOG to provide secondary financing for as much as 100 percent of the Borrower's Minimum Required Investment (MRI). If approved, FHA will issue the NPIOG an approval letter, and this approval will be reflected on the FHA Nonprofit Organization Roster and in FHAC. Interested parties should check the Roster to ensure the approval status of an NPIOG. (C) Section 115 Entities with 501(c)(3) Status Section 115 entities with 501(c)(3) status must meet the eligibility and application requirements for the HUD Homes and FHA Mortgagor programs. iii. Entities Not Requiring FHA Approval to Participate in FHA Nonprofit Programs FHA approval and placement on the HUD Nonprofit Roster are not required for federal, state, or local government agencies or their instrumentalities, provided those entities are not organized as 501(c)(3) nonprofits. (A) Governmental Entities and their Instrumentalities of Government Governmental Entity refers to any federal, state, or local government agency or instrumentality. To be considered an Instrumentality of Government, the entity must be established by a governmental body or with governmental approval or under special law to serve a particular public purpose or designated by law (statute or court opinion). HUD deems Section 115 entities, as identified in Section 115 of the Internal Revenue Code, to be Instrumentalities of Government for the purpose of providing secondary financing. FHA does not maintain a list of Governmental Entity program participants. (B) Nonprofits with a Documented Agreement to Support Secondary Financing 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. I. DOING BUSINESS WITH FHA B. Other Participants 4. Nonprofits and Governmental Entities Handbook 4000.1 89 Last Revised: 11/26/2025 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. Refer to Prohibited Sources of Minimum Cash Investment Under the National Housing Act - Interpretive Rule for additional guidance and clarification on the provision of downpayment assistance through secondary financing. (C) Section 115 Entities Section 115 entities, as identified in Section 115 of the Internal Revenue Code, do not require approval to participate in FHA’s Nonprofit Secondary Financing program. Section 115 entities are not required to have voluntary board members. FHA considers entities that have both 501(c)(3) and Section 115 status to be Instrumentalities of Government for purposes of secondary financing only. iv. Ineligible Participants The nonprofit or any officer, partner, director, principal or employee must not be: • suspended, debarred, excluded from participation in FHA programs as listed in a Limited Denial of Participation (LDP), System for Award Management (SAM) Excluded Parties List, or Credit Alert Verification Reporting System (CAIVRS), or otherwise excluded by similar procedures of any other federal or state agency; • indicted for, or convicted of, an offense which reflects upon the responsibility, integrity, or ability of the nonprofit to participate in FHA activities; • subject to Unresolved Findings as a result of HUD or other governmental investigation, audit, or review; or • engaged in business practices that do not conform to generally accepted practices of prudent nonprofits or that demonstrate irresponsibility. These requirements apply at the time that the nonprofit applies for approval and at all times while it is a HUD-approved Nonprofit.

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