Buying a property with its HUD loan: the TPA, step by step

Why buyers want the loan

The reason is the rate. HUD’s active file for September 30, 2026 lists 11,602 insured apartment loans with a median note rate of 3.65%, while the 572 loans endorsed in the twelve months before that file carry a median of 5.54%. Leaving out risk-share loans, 6,677 loans are below 4% with at least ten years left, about $85.7 billion of balances. A buyer who assumes one inherits a fixed rate that cannot be bought today, plus a long, fully amortizing, non-recourse term.

The assumable-loan finder filters that file by rate, years left and balance. Every property page shows the loan’s rate, balance and maturity from HUD’s file.

The catch is that the loan only covers what is still owed. On a property that has appreciated, the buyer writes a large equity check. Compare the total cost of money, not only the rate: the assumed balance at the old rate plus equity, against a new loan sized to today’s income at today’s rate with less equity.

What HUD is approving

HUD calls the approval a Transfer of Physical Assets. Its asset management handbook (Handbook 4350.1, chapter 13) says a sale by deed of a property with an insured mortgage requires a substitution of mortgagors, and that HUD’s approval is needed for any change in control of the mortgagor, not only a deed. The regulatory agreement backs this up: section 35(a) bars any conveyance of the property, or any transfer of an interest that creates or removes a principal, without HUD’s prior written approval. Closing without consent is a violation of that agreement, and the principals who authorize it lose the protection of the non-recourse clause for that act.

Full TPA or modified TPA

Mergers and corporate restructurings with no change in control fall outside both. The handbook lets HUD treat a transaction as needing a TPA whenever control or a significant sum of money changes hands, however it is structured.

The application package

The application is form HUD-92266, signed by the buyer, the seller and normally the lender. If the lender will not sign, the reason goes to HUD in writing. HUD’s instructions list 22 classes of documents. The ones that drive the timetable:

1. Purchaser’s letter describing every dollar flowing to the project and the seller, the funds set aside for operations and repairs, and confirming the mortgage is or will be brought current.
2. Previous participation filings for each controlling principal of the buyer (see the 2530 guide), plus resumes if the buyer is new to that HUD office.
3. Sources and uses of all funds. HUD’s instructions say there are no exceptions.
4. The executed but unrecorded sale contract and a sworn seller and purchaser affidavit that it recites all the consideration.
5. The new regulatory agreement and the modification or release-and-assumption agreement, executed but unrecorded.
6. Any secondary financing documents, with the first mortgagee’s consent if they create a lien.
7. An interim financial statement and a pro forma balance sheet showing the project accounts the day after closing.
8. The lender’s statement on escrows and the reserve for replacements.

What HUD checks

• The people. Every controlling participant clears previous participation review under 24 CFR part 200, subpart H. HUD must disapprove anyone suspended or debarred and may disapprove a record that shows significant risk.
• The property. HUD reviews physical condition and decides whether the reserve for replacements is adequate; it can require repairs or larger deposits as a condition. Under the regulatory agreement the reserve stays with the property and carries over to the buyer.
• The money. Where the equity comes from, whether the project can carry its debt under the new owner, and whether any secondary financing meets HUD’s rules.
• Layered subsidies. If tax credits or other public funds come with the deal, HUD runs a subsidy layering review, and its preliminary approval can wait on those commitments.

The two-stage approval and the 45-day clock

HUD first issues a preliminary approval. The parties may then close and record the documents HUD approved. Under HUD’s instructions they must meet every condition and send the recorded final-approval documents within 45 working days of preliminary approval unless HUD extends in writing, and they agree to reconvey the property if the terms are not met. HUD grants final approval after reviewing the recorded set.

Fees and costs

The HUD transfer fee is $0.50 per $1,000 of the loan’s original face amount (24 CFR 200.40(h)), not the current balance. It is not charged when both parties are nonprofits or when the transfer happens with a Mark-to-Market restructuring. The handbook adds that substituting individual general partners, or assigning a passive land trust interest without a change in control, generally needs no fee. Lender, servicer and legal fees for processing the assumption are set by those parties; HUD does not cap them in the TPA rules.

Cases that are not a standard TPA

• Risk-share loans (542(b) and 542(c)). The state housing finance agency or other risk-sharing partner asset-manages these loans under its agreement with HUD (24 CFR part 266). Start with that agency, not a HUD field office.
• Properties with a Section 8 contract. Assigning a project-based HAP contract is its own consent, and it is a separate trigger for previous participation review. See Section 8 HAP refinancing.
• Mark-to-Market debt. Properties with HUD-held restructuring notes need a waiver of the notes’ due-on-sale clause under Notice H 2021-02.
• Use agreements and LIHTC restrictions run with the land and bind the buyer. See LIHTC and HUD financing.

Things buyers miss

• Distributions. Under Mortgagee Letter 2022-16, a property that changes hands through a TPA needs two full fiscal years after the transfer before it can qualify for monthly surplus cash distributions, even if the loan documents allow them. Until then, distributions follow the annual or semi-annual rule in the surplus cash guide.
• Refinancing at the same time. The MAP Guide (18.4.6) lets a TPA application run concurrently with a 223(a)(7) refinance, so a buyer can assume and then streamline-refinance the same loan.
• Prepayment terms. They are not on HUD’s public file. Read the note’s prepayment rider before you price a later exit; see HUD prepayment.
• Annual reporting. The buyer files audited financial statements for the part of the year it owned the property. See annual financial statements.

About the handbook

Chapter 13 of Handbook 4350.1 dates from 1992 and form HUD-92266 from 1991. They are still the documents HUD posts and that the MAP Guide and regulatory agreement point to. Previous participation rules were rewritten in 2016 (24 CFR part 200, subpart H), and those govern who is reviewed. Ask the servicer which HUD office and account executive will handle the file; practice varies by region.