221(d)(4) – CONSTRUCTION OR SUBSTANTIAL REHABILITATION MULTIFAMILY FINANCING

Overview

A single construction to permanent loan program for the development or substantial rehab of multifamily properties.

PROPERTIES

Market rate, low-to-moderate income, and subsidized multifamily properties.

BORROWER

Single asset entity, either for profit or not-for-profit

LOAN AMOUNT/LEVERAGE/DSCR

The loan amount will be the maximum proceeds subject to the lesser of:

85% LTC, 85% of net operating income, or 1.20 DSCR for market rate properties

87% LTC, 87% of net operating income, or 1.15 DSCR for affordable housing properties

90% LTC, 90% of net operating income, or 1.11 DSCR for rental assistance properties

MORTGAGE INSURANCE PREMIUM

0.65% due to HUD at closing and 0.65% annually thereafter, escrowed monthly. 0.25% for properties with energy star ratings of at least 75.

TERM & AMORTIZATION

Fixed and interest only for up to 36 months during construction, followed by an additional 40 years of fully amortizing, fixed-rate payments.

INTEREST RATE

Interest rates are fixed at closing. With the credit enhancement provided by FHA, rates are typically lower than conventional financing.

RECOURSE

All loans are non-recourse to key principals during both construction and permanent financing, subject to customary carve-outs.

ASSUMABILITY

Fully assumable subject to FHA approval, and a fee of 0.05% of the original FHA-insured loan amount.

PREPAYMENT

Typically, 10 years of call protection with a two-year lockout, followed by an annual 1% step down from 8%.

TIMING

The one-stage process for affordable and rental assistance properties typically take 5 - 7 months to close, while two-stage process for market rate properties typically close in 8 - 12 months.

APPLICATION

Market rate properties have a two-step process: 1) pre-application, 2) firm application. Affordable and rental assistance properties are eligible to use MAP one-stage processing.

COMMERCIAL SPACE

Commercial and retail space is limited to 25% of net rentable area, and 15% of underwritten effective gross income.

CONSTRUCTION TO PERMANENT

Upon completion of construction and cost certification, the construction loan will automatically roll into the 40-year self-amortizing permanent loan.