Acquisition and Refinancing of Multifamily Properties

FHA Mortgage Insurance Section 223(a)(7)

ELIGIBLE PROPERTIES

Only properties with existing FHA multifamily insured loans

INTEREST RATE

Fixed-rate – determined by market conditions

BORROWER

For-profit or not-for-profit single asset entity

PERSONAL LIABILITY

Non-recourse, subject to standard carve-outs

MAXIMUM LOAN

The lesser of:

  1. 100% of cost to refinance
  2. debt service coverage of 95% NOI for broadly affordable1; 90% of NOI for all others
  3. the original principal balance

TERM AND AMORTIZATION

Maximum of 12 years beyond in-place financing term, and is fully amortizing

COMMERCIAL SPACE

Limited to 25% of net rental area and 20% of effective gross income

PREPAYMENT AND ASSUMPTION

Flexible – best execution typically has a combination of lockout and prepayment penalty for 10 years and is fully assumable subject to HUD approval

REPLACEMENT RESERVES

Minimum of $250 per unit per year or as determined by a Project Capital Needs Assessment (PCNA); initial deposit, if warranted, will be required at closing

MORTGAGE INSURANCE PREMIUM

.25% to .50% due at closing and .25% to .50% annually thereafter

HUD APPLICATION FEE

.15% of requested loan amount due with submission of application

THIRD-PARTY REPORTS

HUD Environmental Review Online (HEROS) is required
PCNA may be waived on a case-by-case basis

TIMELINE

Firm commitment issued 30 calendar days after HUD’s receipt of complete application; closing 45-60 days

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