MULTIFAMILY | FHA/HUD Section 221(d)(4)
New Construction or Substantial Rehabilitation Loan
Our HUD Section 221(d)(4) program provides long-term, low fixed-rate, non-recourse, assumable financing for the construction and permanent financing of new apartment projects or substantial rehabilitation of existing apartment projects.
Market rate, affordable, or subsidized multifamily properties.
Single asset, special-purpose entity, either for profit or not-for-profit.
Maximum of 40 years, fully amortizing (plus interest only period during construction).
Locked before closing and fixed for the duration of the construction period and full 40-year term. (Subject to market conditions.)
Non-recourse for the construction period and duration of the term.
Customizable, typically a 10-year step down, based on market conditions and borrower preferences.
Subject to FHA/HUD and lender approval.
HUD Fees and Expenses
- The annual Mortgage Insurance Premium (MIP) is 0.65% of the outstanding loan amount for market rate transactions. Reduced MIP rates for affordable projects or projects that qualify for Green/Energy Efficient Housing.
- FHA Application Fee of 0.30% of loan amount.
- FHA Inspection Fee of 0.50% of loan amount (new construction) and 0.50% of costs associated with construction (substantial rehabilitation).
- Replacement Reserves determined by a 20-year capital needs analysis, minimum of $250 per unit per annum.
Limited to 25% of net rentable space and 15% of gross income.
Market Study, Appraisal, Phase I Environmental, and Architectural & Cost Review.
Local prevailing wages, as per Department of Labor, paid under Davis-Bacon Act.
Approximately 8 – 12 months for engagement, submission, FHA/HUD review, and closing.
Ginnie Mae guaranteed mortgage-backed securities.
Other Program Parameters
- Escrows for property taxes, insurance, MIP, working capital, and replacement reserves are required.
- A Builder’s and Sponsor’s Profit and Risk Allowance (BSPRA) equal to 10% of all costs other than land can be utilized for sponsors with an identity of interest general contractor. For affordable and rental assisted transactions, a mortgageable developer Fee in lieu of BSPRA is permitted.
- Value of land already owned is included in eligible costs.