Program
Purpose:
Provides
mortgage insurance to facilitate funding the refinancing or acquisition of apartment properties that are at least three years
old (unless property qualifies for 3-year rule waiver). Independent living projects for senior (age 62
years and older with no services) are also eligible.
Eligible Borrower:
Profit motivated, non-profit motivated and public owners are eligible.
Eligible Asset Type:
Market Rate, affordable (1) or rental assisted (2) properties.
Maximum Loan:
Refinancing: The lesser of:
1. The amount of debt that
can be services by 83.3%, 85%, 87%, or 90% of net operating income for market rate, affordable (1) or rental assisted
(2), or Section 202 properties, respectively;
2. 83.3%, 85%, 87%, or
90% of value for market rate, affordable (1) or rental assisted (2),or Section 202 properties, respectively;
3. The
greater of 80% of value or 100% of the total cost of refinancing the existing indebtedness and other mortgageable transaction
costs;
4.
100% of mortgageable transaction costs less grants, public loans and tax credits;
5.
Statutory per unit limits.
Acquisition:
The lesser of:
1. The
amount of the debt that can be services by 83.3%, 85%, 87%, or 90% of net operating income for market rate, affordable (1)
or rental assisted (2), or Section 202 properties, respectively;
2. 83.3%,
85%, 87%, or 90% of value for market rate, affordable (1) or rental assisted (2), or Section 202 properties,
respectively;
3.
83.3%, 85%, 87%, or 90% of acquisition costs (i.e. – total cost to close) for market rate, affordable
(1) or rental assisted (2) properties, respectively;
4. 100%
of mortgageable transaction costs less grants, public loans and tax credits;
5. Statutory per unit limits.
Maximum Term:
35 years, not to exceed 75% of remaining economic life.
Occupancy:
All properties must demonstrate average physical occupancy
of at least 85% for a period of 6 months prior to submittal of the application and maintain through final endorsement (i.e.
stable occupancy).
Maximum underwritten
physical occupancy of 93% for market rate or affordable (1) properties. Maximum underwritten
physical occupancy of 95% for rental assisted (2) properties, or properties where all units have rents at least
20% below comparable market rents.
Funding:
Qualifies
for Ginnie Mae guaranteed mortgage-backed securities, direct placement or may be used to credit enhance tax-exempt bonds.
Interest Rate:
Subject to market conditions.
Mortgage Insurance
Premium:
The annual
MIP has historically been 0.45% of the outstanding loan amount. The first year MIP is set at 1% of the
loan amount.
Prepayment:
Typically closed for 2 years then open
to prepayment at 108% in year 3, declining 1% per year. Other variations are possible based on market conditions
and borrower preference.
Timing:
Section 223(f) processing usually takes about 4 to
5 months (subject to deal specifics).
FHA Application Fees:
0.30%
of the loan amount (non-refundable).
FHA Inspection Fees:
$30
per unit where repairs are $3,000 per unit or less and 1% of repair costs where repairs are more than $3,000.
Replacement Reserves:
Annual deposits required equivalent to the grater of
$250 per unit per annum or as identified in a Project Capital Needs Assessment (PCNA). An initial deposit
will be required at closing which can be capitalized in the mortgage loan and is based on a PCNA.
Personal
Liability:
The FHA insured loan is
non-recourse.
Assumable:
Yes, subject to HUD and lender approval
(0.05%) of the original loan amount).
Secondary Financing:
Permitted
in the form of a surplus cash note, combined loan-to-value cannot exceed 92.5% unless the secondary financing is from a governmental
source.
Repairs/Improvements:
Funds for repairs, deferred maintenance
and capital improvements for generally up to 15% of value or $6,500 per unit (adjusted of high cost areas) can be included
in the loan amount, subject to maximum loan limitations
The program has the following additional parameters:
·
Although not required, all transactions are encouraged to participate in a concept meeting with HUD prior
to application submittal.
· Pursuant to the 3-year
rule waiver, certain properties that have been constructed or substantially rehabilitated within the last three years may
be eligible for financing.
· This program can be used
in conjunction with Low Income Housing Tax Credits and is often used to refinance/acquire properties that involve Section
202, Section 236 and Section 8 funding.
· Davis-Bacon
prevailing wage requirements do not apply to any repairs.
· A Project Capital Needs Assessment
Report (PCNA) will be required every 10 years.
**Term outlines above reflect Notice H 2010-11 (HUD Multifamily
Risk Mitigation) issued on July 6, 2010**
(1) Affordable defined as:
(a) properties that have a recorded regulatory agreement in affect for at least 15 years after final endorsement, (b)
properties that meet at least the minimum Low Income Housing Tax Credit (LIHTC) restrictions of 20% of units at 50% of the
Area Median Income (AMI), or 40% of units at 60% of AMI, with economic rents (i.e. - portion paid by tenants) on those units
no greater than LIHTC rents, and (c) mixed income properties if the minimum low income unit rent and occupancy restrictions
and regulatory agreement meet the above criteria (i.e. – properties need not use LIHTCs to be considered
affordable so long as they comply with (a) and (b) ).
(2) Rental Assisted defined as: properties that
have at least 90% of their units supported by a project based rental assistance contract.
