MORTGAGE INSURANCE FOR PURCHASE OR REFINANCING OF EXISTING MULTIFAMILY RENTAL HOUSING: SECTIONS 223(F)

HUD 223(f) ACQUISITION AND REFINANCING OF MULTIFAMILY PROPERTIES

REVISED 3/2/2020 WITH THE ELIMINATION OF THE THREE (3) YEAR RULE

For multifamily properties that have not yet reached the three year anniversary from the issuance of final Certificate of Occupancy, the following conditions must be met prior to submission of an application to HUD.

· Construction must be complete

· Minimum DSCR of 1.176x for a period of three consecutive months prior to closing. DSCR is lowered to 1.11x for 90% or greater rental assistance.

· The loan will be underwritten to actual revenue collected less normalized operating expenses to determine if required DSCR has been achieved.

· If a cash-out is involved, 50% of the cash-out will be held back until the property achieves minimum applicable DSCR for each of six consecutive months, inclusive of the months of minimum DSCR required prior to closing.

PROPERTIES

The program can be used for the acquisition or refinancing of multifamily properties.

BORROWER

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

MAXIMUM LOAN TO VALue

80% LTV for a cash-out refinance

85% LTV for Market Rate communities

87% LTV for Affordable Housing Properties

90% LTV for Rental Assistance Properties

MORTGAGE INSURANCE PREMIUM

1% of the loan amount is due to HUD at closing from loan proceeds as the first-year MIP. And ranges from 0.25% to 0.60% of the outstanding principal in subsequent years.

TERM & AMORTIZATION

Fixed and fully amortizing for up to 35 years; not to exceed 75% of the remaining economic life of the property.

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, 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

Loans generally take 4 to 6 months to close.