ELIGIBLE PROPERTIES:
Proposed new construction or substantial rehabilitation of apartment
properties.
In order to qualify as a substantial rehabilitation project, either (1) the
cost of repairs, replacements and improvements exceeds the greater of
15% of the estimated replacement cost after completion of all repairs, or
$6,500 per unit adjusted by the local FHA high cost factor, or (2) two or
more building systems are being replaced.
Affordable housing projects must (1) have a recorded regulatory agreement
in effect for at least 15 years after final endorsement, and (2) meet
at least the minimum Low Income Housing Tax Credit restrictions of 20%
of units at 50% of the Area Median Income (AMI) or 40% of units at 60%
AMI. Mixed income projects may qualify if they meet the above criteria.
ELIGIBLE AREAS:
Property must be located in area of concentrated development where a coordinated plan of public and private sector investments are being made.
LOAN TYPE:
Construction and permanent loan.
MAXIMUM LOAN:
New Construction:
Amount equal to the lesser of:
- Statutory unit mortgage limits adjusted by cost not attributable to dwelling use plus the value of land; or
- Depending on the rental mix, the following DSCR and LTC ratios:
| |
DSCR |
Loan Ratio |
| ≥90% Rental Assistance |
1.11 |
90% |
| Affordable |
1.15 |
87% |
| Market Rate |
1.20 |
83.3% |
Substantial Rehabilitation Projects:
Amount equal to the lesser of the three criteria above; or
- 90% of the sum of the FHA estimated cost of repair and rehabilitation and the “as is” value of the property.
INTEREST RATES:
Fixed rate determined by market rates at the time of rate lock.
AMORTIZATION:
Construction loan which converts into a 40-year, fully amortizing loan.
PERSONAL RECOURSE:
None, except for standard exceptions to non-recourse which are the responsibility of the Key Principal(s).
ASSUMABILITY:
Assumable, subject to CWCapital approval.
SUBORDINATE FINANCING:
Generally not permitted, special requirements apply.
PREPAYMENT:
Negotiable.
WAGE REQUIREMENTS:
Adherence to Davis-Bacon prevailing wage laws is required.
ANNUAL MORTGAGE INSURANCE PREMIUM:
During the construction period, the MIP is paid annually in advance, based on a rate established by the FHA. The rate is fixed at initial endorsement. After commencement of amortization, the MIP is escrowed monthly based on the average principal balance.
ESCROWS:
Monthly escrows for real estate taxes, property insurance, reserves for replacement (as determined by FHA) and mortgage insurance premiums.
COMMERCIAL SPACE:
Up to 20% of the gross floor area of the project. Commercial income cannot exceed 30% of gross project income.
ENVIRONMENTAL ISSUES:
Special rules apply for properties which are located in Flood Hazard Zones as designated by FEMA. Phase I site assessment required.
APPLICATION FEE:
A non-refundable fee of 0.3% of the requested mortgage amount is payable to FHA at the time of application (for market rate transactions, 0.15% is paid at pre-application and 0.15% is paid at firm application).
INSPECTION FEE:
0.5% of the mortgage amount (or cost of improvements for sub-rehabilitation projects) is payable to FHA at initial endorsement.
FINANCING AND PLACEMENT FEES:
Negotiable.
LIHTC:
Program can be used in conjunction with Low Income Housing Tax Credits.
BOND ENHANCEMENT:
Program can be used to provide a AAA rating of tax exempt bonds.
CLOSING EXPENSES:
Standard transaction costs, including legal fees, title insurance and survey.
BSPRA:
Program permits the use of a Builders and Sponsors Profit and Risk Allowance for the partial fulfillment of the equity requirements of the loan.
OTHER FHA REQUIREMENTS:
Cash escrows or letters of credit are required for the following:
- Forecasted operating deficits, to be released one year after final endorsement or after 6 months if breakeven operations have been achieved, as determined by FHA.
- 4% of the mortgage amount for working capital, to be released one year after project completion if the loan is not in default.
- 100% performance and 100% payment bond or a letter of credit equal to 15% or 25% (depending on structure type) of the construction contract.
- If not covered by performance and payment bond, 2.5% of the construction contract amount as latent defects guarantee.
- 100% of off-site construction costs.
FHA PROCESSING TIME:
One or two stages for FHA Multifamily Accelerated Processing (MAP) Procedures:
- Pre-Application Stage: 45 days for review.
- Firm Commitment Stage: 45 days for review.
- One stage combining items 1 and 2 above: 60 days.
PRELIMINARY SUBMISSION PACKAGE:
Include the following in your request for a loan quote:
- Property description and location map.
- Number of units with breakdown of proposed rents by unit type.
- Pro forma operating budget, including breakdown of other income.
- Development cost estimate.
- Acquisition cost of land.
- Sponsor resume.
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This is a summary of general program terms, which are subject to change. This is not a commitment to lend.