Mortgage Insurance-Rental And Cooperative Housing For Moderate Income Families And Elderly, Market Interest Rate
HOUSING, DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT
National Housing Act, as amended, Section 221, Public Law 86-372, 12 U.S.C. 1715(1).
To provide good quality rental or cooperative housing for moderate income families, the elderly, and handicapped. Single Room Occupancy (SRO) may also be insured under this section (see program 14.184).
Types of Assistance
Uses and Use Restrictions
Section 221(d)(3) and Section 221(d)(4) insures lenders against loss on mortgage defaults for market rate rental projects. Insured mortgages may be used to finance construction or rehabilitation of detached, semidetached, row, walkup, or elevator-type rental or cooperative housing containing 5 or more units. The program has statutory mortgage limits which vary according to the size of the unit, the type of structure, and the location of the project. There are also loan-to- replacement cost and debt service limitations. Contractors for new construction and substantial rehabilitation projects must comply with prevailing wage requirements under the Davis-Bacon Act. Section 221(d)(3) mortgages require appropriated credit subsidy, which is limited.
Public, profit-motivated sponsors, limited distribution, nonprofit cooperative, builder-seller, investor-sponsor, and general mortgagors.
All families are eligible to occupy dwellings in a structure whose mortgage is insured under the program, subject to normal tenant selection. There are no income limits. Projects may be designed specifically for the elderly and handicapped.
Documentation regarding the characteristics of the property and the qualifications of the mortgagor are assembled by the mortgagee and submitted with the application. This program is excluded from coverage under OMB Circular No. A-87.
Application and Award Process
Under Traditional Application Processing (TAP), the sponsor has an initial conference with the local HUD Multifamily Hub or Program Center to determine the preliminary feasibility of the project, before the submission of a site appraisal and market analysis (SAMA) or a feasibility application. For Multifamily Accelerated Processing (MAP), the sponsor works with a MAPapproved lender who submits certain required exhibits for the preapplication stage. If HUD determines that the exhibits are acceptable, the lender is invited to submit a Firm Commitment application. An environmental assessment is required for this program. This program is eligible for coverage under E.O. 12372, "Intergovernmental Review of Federal Programs." An applicant should consult the office or official designated as the single point of contact in his or her State for more information on the process the State requires to be followed in applying for assistance, if the State has selected the program for review. This program is excluded from coverage under OMB Circular No. A-102.
For Traditional Application Process (TAP) following HUD's issuance of a SAMA letter (new construction) or Feasibility Letter (substantial rehabilitation) the sponsor submits a formal mortgage insurance application through a HUDapproved mortgagee to the local HUD Multifamily Hub and Program Center for processing. For Multifamily Accelerated Processing (MAP), the lender submits the required exhibits, including a full underwriting package, which are then reviewed by the Multifamily Hub and Program Center before a Firm Commitment is issued. This program is excluded from coverage under OMB Circular No. A-110.
The local HUD Multifamily Hub and Program Center reviews the application to determine whether the proposal is feasible. Considerations include market need, zoning, architectural merits, capabilities of sponsors, availability of community resources, etc. If the project meets program requirements, the HUD Multifamily Hub and Program Center issues the lender a commitment to insure the project mortgage.
Deadlines are established on a case-by-case basis by the local HUD Multifamily Hub and Program Center.
Range of Approval/Disapproval Time
Processing time depends upon the degree of preparation by the sponsor and whether or not TAP or MAP is used.
If an application for mortgage insurance is refused, HUD will state the reasons for the refusal. If reapplication is desired, the applicant may modify the application and reapply.
Formula and Matching Requirements
Section 221(d)(3): For general and limited distribution mortgagors, the maximum amount of the loan is equal to 90 percent of the estimated replacement cost. For nonprofit, public and cooperative mortgagors the maximum amount of the loan may be up to 100 percent of the estimated replacement cost in most cases. Section 221(d)(4): The maximum amount of the loan is equal to 90 percent of the estimated replacement cost. All projects: The mortgage insurance premium depends on whether the application is under Section 221(d)(3) or Section 221 (d) (4). Application processing and commitment fees are $3 per $1,000 of the mortgage amount. The HUD inspection fee may not exceed $5 per $1,000 of the mortgage amount.
Length and Time Phasing of Assistance
The maximum mortgage term is 40 years, or not in excess of three-fourths of the remaining economic life, whichever is less.
Post Assistance Requirements
Any change of the mortgagor during the period of mortgage insurance must be approved by HUD. Defaults in meeting the mortgage terms must be reported. All mortgagors are required to submit an annual financial statement to HUD. All approved mortgagees must furnish a copy of their latest financial statements at any time upon request by HUD.
The Department of Housing and Urban Development reserves the right to audit the accounts of either the mortgagee or mortgagor in order to determine their compliance and conformance with HUD regulations and standards.
Mortgagees are required to service and maintain records in accordance with acceptable mortgage practices of prudent lending institutions and the HUD regulations.
(Mortgages insured) FY 07 $1,254,248,333; FY 08 est $1,218,750,000; and FY 09 est $1,715,000,000.
Range and Average of Financial Assistance
Loan sizes range from $1,100,000 to $40,000,000 with an average of $9.7 million. Project sizes range from 35 to 526 units with an average of 155 units.
In Fiscal Year 2007, HUD insured mortgages for 104 projects with 16,219 units, totaling $1.0 billion. It is estimated that the Department will insure approximately the same number of projects in Fiscal Year 2008.
Regulations, Guidelines and Literature
24 CFR 221 et seq.; Fact Sheet: Rental Housing for Moderate Income Families, no charge; HUD Handbook 4560.2, Mortgage Insurance for Moderate-Income Housing Projects, Section 221 (d)(4), no charge; HUD Handbook 4560.1, Section 221(d)(3) Market Interest Rate for Project Mortgage Insurance, no charge; HUD Handbook 4560.3, Mortgage Insurance for Single Room Occupancy Projects; no charge; HUD Handbook 4550.3; Basic Cooperative Housing Insurance Handbook, no charge. Handbooks are on HUDCLIPS at http://www.hudclips.org The Multifamily Accelerated Processing (MAP) Guide is on the web. Refer to HUD's MAP page at http://www.hud.gov/offices/hsg/mfh/map/maphome.cfm
Regional or Local Office
Persons are encouraged to contact the Multifamily Hub or Program Center with jurisdiction for the proposed project. HUD Multifamily Hubs or Program Centers are listed at http://www.hud.gov/offices/hsg/mfh/mfbroch/hubs_pcs.cfm or in the Catalog Address Appendix IV.
Office of Multifamily Development, Department of Housing and Urban Development, Washington, DC 20410. Telephone: (202) 708-1142.
Web Site Address
14.134, Mortgage Insurance-Rental Housing
Examples of Funded Projects
Criteria for Selecting Proposals