FHA/HUD 223f Acquisition and Refinancing for MultiFamily Properties

HUD's FHA 223(f) Multifamily Loan insurance program has become more popular in the past years, most recently spurred by the 2008 Credit Crunch. Even with all the popularity it gained, it's still grossly misunderstood and even unknown, but it offers financing that is always longer term and longer amortization, and at a lower interest rate than Fannie Mae, Freddie Mac, CMBS loans, and even life company multifamily loans.

Eligible Properties:    Market rate properties of any class, cooperatives, affordable or subsidized housing.
                                     Construction or any substantial rehabilitation must have been completed at least three
                                      years before application to HUD. Student housing is allowable, but cash flows cannot
                                     assume multiple rents from one unit and rents must be in line with market rate multifamily

Commercial Space:   Limited to 25% of net rentable area and 20% of effective gross income

Borrower:                   Single asset, special purpose entity, either for profit or non-profit

Recourse:                   Non-recourse

Interest Rate:             Fixed for term of loan, determined by market conditions at time of rate lock. Rate lock deposit is
                                     0.5% and refunded at closing.:            

Loan Parameters:     Property Type                   Maximum LTV                  Minimum DSC                    Acquisition LTC                   Refinance LTC
                                     Subsidized1                             90%                                     1.11x                                      90%                           Greater of 100% 
                                     Affordable2                              87%                                     1.15x                                      87%                           Cost(3) or 80% LTV 
                                     Market Rate                             85%                                     1.18x                                      85%
                                    1 At least 90% of the units covered by a project-based Section 8 contract.
                                    2 Regulatory Agreement with a minimum set-aside (e.g.,40% of units at 60% AMI, or 20% of units at 50% AMI) in effect
                                       for at least 15 years after the new loan closes.
                                    3 Refinance cost includes satisfaction of existing debt (including penalties), any needed repairs, an initial deposit to
                                       capital needs reserve, due diligence and closing costs.

                                    In addition, loan cannot exceed the programmatic per-unit maximum as adjusted by HUD for
                                    project location (local cost factor). 

Repair and Rehab    Up to $15,000 per unit times a local cost factor (typically 190%-270%); additionally, repairs may not replace more
Limitations:               than 50% of any two building systems: electrical, plumbing, mechanical, building envelope, structural.

Term and                   A maximum term of 35 years, fully amortizing  
Prepayment              Negotiable with best pricing for 10 years of call protection (can be a combination of lockout and/or penalty); loan is fully       and Assumption:      assumable subject to HUD approval.   
Escrows:                    a) Taxes, insurance and mortgage insurance premium are escrowed monthly;
                                    b) Capital needs reserve will be maintained with monthly deposits in accordance with HUD guidelines on a property-specific                                         basis (minimum $250/unit/year).  
Mortgage Insurance  1% due to HUD at closing and 0.6% annually thereafter (0.25%-0.35% for affordable and
Premium:                     subsidized properties, 0.25% for Energy Star certified properties).

HUD Application         0.30% of estimated loan amount due with submission of application.

Third Party Reports:   Appraisal, Environmental and Capital Needs Assessment

Timing:                         Typical application is submitted within 45-60 days of engagement, followed by 60-90 days to issuance of HUD’s                                                           commitment and 30-45 days to closing

To begin our application process,  submit a preliminary application, or contact us at (855) 577-2500.