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 (2) $6,500 per unit adjusted by the local HUD high cost percentage; or two or more building systems are being replaced.
BORROWER:
The borrower must be chartered under Chapter 501(c) (3) of the Internal Revenue Code.
LOAN TYPE:
Construction and permanent loans.
MAXIMUM LOAN:
New Construction:
Amount equal to the lesser of:
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Statutory unit mortgage limits adjusted by cost not attributable to dwelling use; or
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100% of the HUD estimated replacement cost; or
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1.05 debt service coverage.
Substantial Rehabilitation Projects:
Amount equal to the lesser of the three criteria above; or
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100% of the sum of the HUD 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:
Non-recourse.
ASSUMABILITY:
Assumable, subject to CWCapital approval.
SUBORDINATE FINANCING:
Generally not permitted, special requirements apply.
PREPAYMENT:
Negotiable, but cannot be prepaid in full without prior HUD approval.
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 HUD. 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 HUD) and mortgage insurance premiums.
COMMERCIAL SPACE:
Up to 10% of the gross floor area of the project.
Commercial income cannot exceed 15% of gross project income.
ENVIRONMENTAL ISSUES:
Special rules apply for properties which are located in Flood Hazard Zones as designated by FEMA.
APPLICATION FEE:
A non-refundable fee of 0.3% of the requested mortgage amount is payable to HUD at the time of application, plus estimated underwriting costs for market study, appraisal, architectural/engineering report, cost analysis, environmental assessment and other loan processing costs.
INSPECTION FEE:
For New Construction projects, 0.5% of the mortgage amount is payable to HUD at Initial Endorsement. For Sub-Rehabilitation Projects, 0.5% of the cost of improvements is paid to HUD at Initial Endorsement.
FINANCING AND PLACEMENT FEES:
Negotiable.
CLOSING EXPENSES:
Standard transaction costs, including legal fees, title insurance and survey.
DEVELOPER’S FEE:
Based on a sliding scale, 8% of the mortgage with a minimum of $40,000 and a maximum of $400,000.
BOND ENHANCEMENT:
Program can be used to provide AAA rating of tax exempt bonds.
OTHER HUD REQUIREMENTS:
Cash escrows or letters of credit are required for the following:
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Forecasted operating deficits, to be released one year after final endorsement if breakeven operations have been achieved.
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2% of the mortgage amount for working capital, to be released one year after project completion if loan is not in default.
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100% performance and 100% payment bond or a letter of credit equal to 15% or 25% (depending on structure type) of the construction contract.
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If not covered by performance and payment bond, 2.5% of the construction contract amount as latent defects guarantee.
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100% of off-site construction costs.
HUD PROCESSING TIME:
One or two stages for HUD 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:
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Property description and location map.
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Number of units with breakdown of proposed rents by unit type.
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Pro forma operating budget, including breakdown of other income.
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Development cost estimate.
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Acquisition cost of land.
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Sponsor resume.
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