Insured Loan Program

U.S. Department of Housing and Urban Development has two special programs that secure mortgage loans for new construction or substantial rehabilitation of multifamily rental or cooperative. These projects must be designed to moderate-income families, the elderly or the disabled.

The programs are known by name of section: 221 (d) (3) is available to nonprofit sponsors only. These entities may receive an insured mortgage up to 100% of the FHA estimated replacement cost for the project. for-profit sponsors may quality for the 221 (d) (4) mortgage insurance of up to 90% of the FHA estimated replacement cost for the project. The latter program will be the focus of this article.

Insured mortgages may be used to finance the construction or rehabilitation of housing consisting of at least 5 units. They can be individual, paired row or dwelling without a lift or elevator of cooperative.

Many types of mortgage holders can apply for this insurance, including builders, sellers, investors and sponsors and mortgagors in general.

The only restrictions on the type of families who are eligible to live in the resulting buildings are normal tenant selection. There are no income limits and no rule that mandates of the Section 8 housing for the poor. Projects can be designed specifically for the elderly or the disabled, but need not be.

borrowers generally work with a Multifamily Accelerated Processing (MAP) approved lender. The lender will create and present the documents required in the pre-application stage. After review by HUD, the borrower will receive a "letter of invitation" if the submission passes muster. It should be noted that the word fast does not mean that this process will be faster. In fact, take many months, and that's one reason many directors try to find first project financing commercial lenders. However, on the positive side, 221 (d) (4) loans are fixed, amortization over 40 years, are without recourse, assumable. These benefits can make it worthwhile to continue this program.

After receiving approval from HUD, the lender submits the application for Firm Commitment, including a full underwriting package. Centre regional HUD Multifamily or Program Center will consider market analysis, zoning, architectural merits, capabilities of the equipment of the borrower and the availability of community resources. If all these pieces suggest an acceptable level of risk, HUD will then issue a commitment to the lender for mortgage insurance.

Despite all these requirements and constraints, in 2008, HUD insured mortgages for 88 projects involving nearly 14,000 units, for a total of $ 1 billion.