Mortgage Insurance For The Purchase Or Refinancing Of Existing Multifamily Housing Projects
HOUSING, DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT
National Housing Act, Section 223(f), as amended; Housing and Community Development Act of 1974, as amended, Public Law 93-383. 12 U.S.C. 1715n.
To provide mortgage insurance to HUD-approved lenders for the purchase or refinancing of existing multifamily housing projects, whether conventionally financed or subject to federally insured mortgages at the time of application for mortgage insurance. The program allows for the long term mortgages that can be financed with Ginnie Mae Mortgage-Backed Securities.
Types of Assistance
Uses and Use Restrictions
Section 223(f) insures lenders against loss on mortgage loans. These loans may be used to purchase or refinance existing multifamily housing projects. Only projects not requiring substantial rehabilitation are acceptable under this section. The estimated cost of required repairs may not exceed 15 percent of the estimated value after repairs or $6,500 per unit adjusted by a high cost factor, whichever is greater and may not involve the replacement of more than one major system. The program has statutory per unit 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-value and debt service limitations. Prevailing wage requirements under the Davis-Bacon Act do not apply to this program.
Mortgagors may be either private or public. The property must consist of not less than 5 living units and must meet the following criteria: (1) the mortgage cannot exceed 85 percent of the HUD estimated value of the project; (2) three years must have elapsed from the later date of completion of project construction or substantial rehabilitation, or the beginning occupancy date of application for mortgage insurance; (3) the remaining economic life of the project must be long enough to permit at least a ten-year mortgage term or 75 percent of the estimated life of the physical improvements.
All persons are eligible to occupy such projects subject to normal occupancy restrictions.
Documentation regarding the characteristics of the property and the qualifications of the purchaser or existing mortgagor in refinance projects are assembled by the mortgagee and submitted with the application. Management plan must be submitted at time of application for commitment. This program is excluded from coverage under OMB Circular No. A-87.
Application and Award Process
For Traditional Application Process (TAP) before the application is filed, the sponsor has a preapplication conference with local HUD Multifamily Hub and Program Center Staff. For Multifamily Accelerated Processing (MAP) there is no preapplication stage for Section 223(f). The MAP-approved lender prepares and submits the application for a Firm Commitment, including a full underwriting package for HUD Multifamily Hub or Program Center review. This program is excluded from coverage under OMB Circular No. A-102 and E.O. 12372.
The applicant will submit a formal application for conditional or firm commitment through a HUD approved mortgagee. This program is excluded from coverage under OMB Circular No. A-110. An environmental assessment is required.
The local HUD Multifamily Hub and Program Center reviews the application to determine proposal eligibility. If the project meets program requirements, the local HUD Multifamily Hub and Program Center issues the commitment to the lender to insure the project.
Deadlines are established on a case-by-case basis.
Range of Approval/Disapproval Time
Processing time depends on the degree of preparation of the sponsor, and whether MAP or TAP is used.
If an application for mortgage insurance is denied, HUD will state the reasons for denial.
Formula and Matching Requirements
The maximum amount of the loan will not be in excess of 85 percent of the estimated value.
Length and Time Phasing of Assistance
The mortgage term should not be less than 10 years nor should it exceed the lesser of 35 years or 75 percent of the estimated remaining economic life of the physical improvements.
Post Assistance Requirements
Any change of the mortgagor during the period of mortgage insurance must be approved by HUD. Defaults in meeting the mortgage term must be reported. All mortgagors are required to submit annual financial statements to HUD. All approved mortgagees at any time upon request by HUD must furnish copies of their latest financial statements.
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 $1,509,619,356; FY 08 est $1,125,000,000; and FY 09 est $1,575,000,000.
Range and Average of Financial Assistance
Loan sizes range from $478,700 to $14,300,000, with an average of $3.5 million. Project sizes range from 8 units to 364 units with an average of 121 units.
In Fiscal Year 2007, HUD insured mortgages for 355 projects with 29,284 units, totaling $1.1 billion. It is estimated that the Department will insure the same number of mortgages in Fiscal Year 2008.
Regulations, Guidelines and Literature
Fact Sheet, Section 223(f) Mortgage Insurance; 24 CFR 200, HUD Handbook 4565.1, Mortgage Insurance for the purchase or Refinancing of Existing Multifamily Housing Projects, Section 223(f) available on http://www.hudclips.org The Multifamily Accelerated Processing (MAP) guide may be found at http://www.hud.gov/offices/hsg/mfh/map/maphome.cfm
Regional or Local Office
Persons are encouraged to communicate with the nearest local HUD Multifamily Hub or Program Center listed at http://www.hud.gov/offices/hsg/mfh/mfbroch/hubs_pcs.cfm or the nearest HUD Field Office listed in 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
Examples of Funded Projects
Criteria for Selecting Proposals