Archives: HUD Programs

MULTIFAMILY | FHA/HUD Section 223(f)

Acquisition and Refinancing of Multifamily Properties

Our HUD Section 223(f) program provides for permanent financing for the purchase or refinance of market rate multifamily properties, affordable or rental assisted properties.

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Multifamily Housing

Eligible Properties

Multifamily properties including market rates, affordable or rental assisted properties.

Term

Up to 35 years.

Interest Rate

Locked before closing and fixed for the duration of the term. (Subject to market conditions.)

Guarantees

Non-recourse for the duration of the term.

Prepayment

Customizable, typically a 10-year step down, based on market conditions and borrower preferences.

Assumable

Subject to FHA/HUD and lender approval.

Loan Parameters

Maximum loan amount will be the lessor of parameters below. Large loans (currently > $130MM) carry more conservative UW numbers.
Market Rate 87% 87% 1.15
Eligible Affordable 90% 90% 1.15
Subsidized 90% 1.11 1.11

(*Max LTV for cash out refinance is 80%.)

HUD Fees and Expenses

  • The annual Mortgage Insurance Premium (MIP) is 0.60% of the outstanding loan amount for market rate transactions. Reduced MIP rates as low as 0.25% for affordable projects or projects that qualify for Green/Energy Efficient Housing.
  • FHA Application Fee of 0.30% of loan amount.
  • FHA Inspection Fee is based on the level of repairs.
  • Replacement Reserves determined by a 20-year capital needs analysis, minimum of $250 per unit per annum with initial deposit based upon CNA.

Commercial Space

Limited to 25% of net rentable space and 20% of gross income.

Third-Party Reports

Appraisal, Environmental, Property Capital Needs Assessment (PCNA) required.

Timing

Approximately 6-9 months for engagement, submission, FHA/HUD review, and closing.

Funding

Ginnie Mae guaranteed mortgage-backed securities.

Other Program Parameters

  • Escrows for property taxes, insurance, MIP, and replacement reserves are required.
  • Total repairs are limited to approximately $45,000 per unit with valuation and DSC assuming completion of those repairs. Lender holds 110%-120% escrow and repairs must be completed in 12 months.
  • Age restricted properties may quality so long as head of household is 62 or older and occupancy is not restricted to any remaining occupants. Affordable properties may be eligible for 55+ restriction.

MULTIFAMILY | FHA/HUD Section 223(a)(7)

Refinancing of Multifamily Properties with Existing FHA-Insured Debt

Our HUD Section 223(a)(7) mortgage program provides for the streamlined refinance of an existing FHA-insured project.

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Multifamily Housing

Eligible Properties

All properties that currently have FHA-insured debt.

Term

Up to 12 years extension of the original FHA-insured loan maturity, not to exceed the maximum term for the original loan program.

Interest Rate

Locked before closing and fixed for the duration of the term. (Subject to market conditions.)

Guarantees

Non-recourse for the duration of the term.

Prepayment

Customizable, typically a 10-year step down, based on market conditions and borrower preferences.

Assumable

Subject to FHA/HUD and lender approval.

Loan Parameters

Maximum loan amount will be the lesser of the original principal balance when first insured or parameters below.
Market Rate 100% 1.11 0.50% / 0.25%*
Affordable 100% 1.11 0.45% / 0.25%*
Subsidized 100% 1.05 0.25%

(*If project meets Green/Energy Efficient housing qualifications.)

HUD Fees and Expenses

FHA Application Fee of 0.15% of loan amount.

Third-Party Reports

Property Capital Needs Assessment (PCNA) may be required.

Timing

Approximately 3 - 4 months for engagement, submission, FHA/HUD review, and closing.

Funding

Ginnie Mae guaranteed mortgage-backed securities.

Other Program Parameters

  • Repairs limited to $1,500 per unit, exclusive of accessibility changes.
  • Cash out is not permitted.

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.

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Multifamily Housing

Eligible Properties

Market rate, affordable, or subsidized multifamily properties.

Eligible Borrowers

Single asset, special-purpose entity, either for profit or not-for-profit.

Term

Maximum of 40 years, fully amortizing (plus interest only period during construction).

Interest Rate

Locked before closing and fixed for the duration of the construction period and full 40-year term. (Subject to market conditions.)

Guarantees

Non-recourse for the construction period and duration of the term.

Prepayment

Customizable, typically a 10-year step down, based on market conditions and borrower preferences.

Assumable

Subject to FHA/HUD and lender approval.

Loan Parameters

Market Rate 87% 1.15
Eligible Affordable 90% 1.11
Subsidized 90% 1.11
*Middle Income 90% 1.11

Large loans carry more conservative UW parameters.

*Eligible Middle Income projects must be regulated with minimum 50% of units at or below 120% median income.

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 as low as 0.25% 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.

Commercial Space

Limited to 25% of net rentable space and 15% of gross income. Alternative Section 220 program may be available for properties with more commercial income.

Third-Party Reports

Market Study, Appraisal, Phase I Environmental, and Architectural & Cost Review.

Construction Wages

Local prevailing wages, as per Department of Labor, paid under Davis-Bacon Act.

Timing

Approximately 8 – 12 months for engagement, submission, FHA/HUD review, and closing.

Funding

Ginnie Mae guaranteed mortgage-backed securities.

Other Program Parameters

  • Escrows for property taxes, insurance, MIP, and replacement reserves are required.
  • Working Capital and Initial Operating Deficit escrows held by lender and if not used for intended purposes, generally released at final endorsements plug 12 months (assumes 6 months Break Even coverage).
  • Cost includes a builders fee and sport profit amount depends upon ownership structure.
  • Age-restricted properties may qualify so long as head of household 62+ and all others unrestricted children must be permitted. Alternative program available restricted all residents to 62+.
  • Value of land is included in eligible costs.