The U.S. Department of Housing and Urban Development (HUD) has suspended the requirement to use the CNA eTool for 10-year updated Capital Needs Assessments and several other Office of Asset Management transactions. HUD has also paused its routine review of 10-year updates, placing greater emphasis on lender review and confirmation.
For FHA-insured multifamily properties, the change is most impactful in the context of 10-year updated CNAs, where lender confirmation of reserve adequacy now serves as the primary compliance checkpoint.
The suspension applies to several Asset Management CNA submission scenarios, including:
- 10-year updated CNAs for FHA-insured properties
- Partial Payment of Claims (PPC) or loan modifications
- Section 202/811 properties with PRAC assistance (Project Rental Assistance Contracts) that do not have FHA insurance or Rental Assistance Demonstration (RAD) conversions
- Transfer of Physical Assets (TPA) transactions and Housing Assistance Payment (HAP) contract assignments, where CNA eTool use is not required under the notice
Importantly, the notice does not eliminate CNA requirements. Owners must still complete and submit required assessments.
What Has Changed for 10-Year Updates
Under the updated guidance:
- Owners must still complete 10-year updated CNAs.
- The CNA no longer needs to be prepared and submitted through the CNA eTool.
- HUD Asset Management will not routinely review the 10-year CNA.
- Lenders must review the CNA and confirm whether the current Reserve for Replacement funding is adequate.
Lenders have always reviewed these assessments. What has changed is that HUD will no longer conduct its own routine review. Instead, lenders must formally confirm to HUD whether reserves are sufficient for the next ten years.
If reserves are not adequate, lenders must indicate whether deposits should increase or whether a recapitalization plan may be required.
HUD also updated its recommended minimum reserve benchmark. While the recommendation is not mandatory, HUD now advises that reserves equal or exceed the greater of:
- 36 months of the initial monthly reserve deposit, or
- $1,500 per unit
Why This Matters for Owners and Buyers
With HUD stepping back from routine review, lender expectations carry greater weight in how capital needs are evaluated and documented.
Removing the CNA eTool format may also reduce administrative rigidity and allow more flexibility in presentation. Consultants and lenders can align reporting more directly with underwriting requirements instead of a fixed system template.
For owners and buyers, particularly in refinancing or preservation scenarios, this may support more direct discussions around capital planning priorities, including useful life assumptions, reserve sizing, and repair timing.
Flexibility does not mean reduced scrutiny. Lenders must formally confirm reserve adequacy to HUD, and their underwriting conclusions may lead to deposit increases or recapitalization planning.
What Has Not Changed
Several requirements remain in effect:
- 10-year CNAs must still be completed and submitted.
- Lenders must formally confirm reserve adequacy or identify the need for increased deposits.
- HUD retains the right to require CNA eTool usage in the future.
- HUD may review a CNA if it determines that a property, owner, or lender has not complied.
- Failure to comply may result in suspension of reserve disbursements.
The CNA eTool requirement continues to apply to new Federal Housing Administration insurance applications and certain RAD transactions.
Practical Considerations for Owners
Given the increased dependence on lender confirmation, owners and buyers may want to consider:
- Engaging consultants early to align the scope with lender expectations
- Ensuring replacement reserve projections are clearly supported
- Evaluating reserve balances against HUD’s updated benchmark guidance
In practice, successful outcomes will depend on coordination between owners, lenders, and consultants rather than minimum compliance execution.
A Broader Trend
This notice reflects an effort to streamline administrative processes and reallocate oversight resources. For multifamily stakeholders, it represents a redistribution of review authority rather than a relaxation of capital planning discipline.
As HUD steps back from routine review, lenders will rely more heavily on the quality of the CNA itself when evaluating reserve adequacy and long-term capital needs. That places greater importance on assessments that clearly document assumptions, support reserve projections, and align with lender underwriting expectations.
Owners who approach this transition with clear capital planning, defensible reserve analysis, and early coordination with lenders and consultants will be best positioned to navigate this evolving regulatory environment.
