Mortgage Insurance-Rental Housing In Urban Renewal Areas
HOUSING, DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT
National Housing Act, as amended, Section 220, Public Law 83-560, 12 U.S.C. 1745(k).
To provide good quality rental housing in urban renewal areas, code enforcement areas, and other areas designated for overall revitalization.
Types of Assistance
Uses and Use Restrictions
Section 220 insures lenders against loss on mortgage defaults. Insured mortgages may be used to finance proposed construction or rehabilitation of detached, semi-detached, row, walk-up, or elevator type rental housing or to finance the purchase of properties which have been rehabilitated by a local public agency. Property must consist of two or more units and must be located in an urban renewal area, urban redevelopment project, or code enforcement program area, urban area receiving rehabilitation assistance as a result of natural disaster, or area where concentrated housing, physical development and public service activities are being carried out in a coordinated manner. 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-toreplacement cost and debt service limitations. Contractors for new construction and substantial rehabilitation projects must comply with prevailing wage standards under the Davis-Bacon Act.
Eligible mortgagors include private profit motivated entities, public bodies, and others who meet HUD requirements for mortgagors.
All families eligible to occupy a dwelling in a structure whose mortgage is insured under the program, subject to normal tenant selection.
Documentation regarding the characteristics of the property and the qualifications of the mortgagor must be submitted with the application. This program is excluded from coverage under OMB Circular No. A-87.
Application and Award Process
For Traditional Application Process (TAP) of a mortgage insurance application, the sponsor will have an initial conference with the local HUD Multifamily Hub or Program Center to determine the preliminary feasibility of the project before a site appraisal and market analysis application, or a firm commitment application is submitted. For Multifamily Accelerated Processing (MAP) for new construction or substantial rehabilitation loans, the sponsor works with a MAPapproved lender who submits certain required exhibits for the preapplication stage. This program is excluded from coverage under OMB Circular No. A-102. 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.
For traditional processing, the application for a Firm Commitment is submitted by the sponsor through a HUD-approved mortgagee, and the application is processed by the Multifamily Hub or Program Center. For Multifamily Accelerated Processing (MAP), the application for a Firm Commitment, including a full underwriting package, is submitted by the MAP leader for HUD Field Office review. This program is excluded from coverage under OMB Circular No. A-110.
The local Multifamily Hub or 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 Multifamily Hub or Program Center issues the lender a commitment to insure the project mortgage.
Deadlines are established on a case by case basis by the Multifamily Hub or Program Center.
Range of Approval/Disapproval Time
Processing time depends upon the degree of preparation by the sponsor and whether or not Multifamily Accelerated Processing (MAP) or Traditional Application Processing (TAP) is used.
If an application for mortgage insurance is denied, HUD will state the reasons for the denial. If reapplication is desired, the applicant may modify the application and reapply.
Formula and Matching Requirements
The maximum amount of the loan may not exceed 90 percent of the estimated replacement cost for new construction. For substantial rehabilitation projects, the maximum mortgage amount is 90 percent of the estimated cost of repair and rehabilitation and the estimated value of the property before the repair and rehabilitation project. The HUD application processing fee is $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 annual financial statements to HUD. All approved mortgagees must furnish copies 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.
Reported under program 14.135.
Range and Average of Financial Assistance
Loan sizes range from $1,365,500 to 45,495,200, with an average of $17.9 million. Project sizes range from 48 units to 340 units with an average of 138 units.
In Fiscal Year 2007, HUD insured one project with 420 units, totaling $29.4 million. It is estimated that the Department will insure approximately the same number of mortgages during fiscal Year 2008.
Regulations, Guidelines and Literature
24 CFR 220.1 et seq.; Fact Sheet: Urban Renewal Housing (Mortgage Insurance), no charge; Rental Housing in Urban Renewal Areas for Project Mortgage Insurance, HUD Handbook 4555.1, no charge, available on HUDCLIPS at http://www.hudclips.org
Regional or Local Office
Persons are encouraged to communicate with the nearest local HUD Multifamily Field Office listed at http://www.hud.gov/offices/hsg/mfh/mfbroch/hubs_pcs.cfm or contact the nearest HUD Field Office listed in the Catalog Address Appendix IV.
Office of Multifamily Development, Department of Housing and Urban Development, 451 7th Street, S.W., Washington, DC 20410. Telephone: (202) 708-1142.
Web Site Address
14.134, Mortgage Insurance-Rental Housing
14.135, Mortgage Insurance-Rental And Cooperative Housing For Moderate Income Families And Elderly, Market Interest Rate
Examples of Funded Projects
Criteria for Selecting Proposals