1. National Housing & Rehabilitation Association Summer Institute
July 18-21, Martha’s Vineyard, MA
Sponsors:

2. FHA Lending
Jennifer Massey, Chief Underwriter
July 20, 2018
NH&RA Summer Institute 

3. Why/When FHA? NH&RA Summer Institute FHA Programs – Key Advantages:
Construction Loan Component
Term – 40 Years Plus Construction Period
GNMA Interest Rates
Reduced MIP for Affordable/Green
Tax Credit Pilot – 223(f) and 221(d)(4)
Non-recourse to the sponsor
NH&RA Summer Institute 

4. Why/When FHA? NH&RA Summer Institute Low current interest rates
Construction/Rehabilitation Interest Rates Locked at Initial Endorsement (rolls over to permanent loan at final endorsement)
Longer Amortization Periods
Refinance: Up to 35 years
Construction/Rehabilitation: Up to 40 years + construction period
Non-recourse to the mortgagor
NH&RA Summer Institute 

5. FHA Programs NH&RA Summer Institute 223(f) Refinance or Acquisition
Minor/Moderate Repairs ($15,000/unit times high cost factor)
Permanent Debt with Repair Escrow – up to 35 years (fully amortizing)
90% rental assistance: DSC 1.11; 90% Loan to Value
Affordable: DSC 1.15; 87% Loan to Value
223(f) – LIHTC
90% rental assistance with a new 20 year term
Rehab expenditures of up to $40,000/unit in hard costs(no adjustment for high cost areas)
Tax Credit or Bond Cap allocation in hand
Located in any part of the country but processed in Multifamily Hubs by designated LIHTC underwriters
NH&RA Summer Institute 

6. FHA Programs Cont’ NH&RA Summer Institute
221(d)(4) – New Construction or Substantial Rehabilitation
Substantial Rehabilitation: Two or more major building systems or over the threshold of $40,000 per unit
Construction/permanent debt all in one transaction – initial/final endorsement (one rate lock)
40 year financing, after final endorsement (fully amortizing)
90% rental assistance: DSC 1.11; Loan to cost: 90%
Affordable: DSC 1.15; Loan to cost: 87%
Deferred submittal of architectural plans
NH&RA Summer Institute 

7. FHA Programs Cont’ NH&RA Summer Institute Tax Credits and Bonds
FHA programs marry well with Historic Tax Credits, LIHTC, TIF, and Tax Exempt Bonds.
Secondary Debt
HUD will not impose a loan to value limit on secondary financing. This means that in some cases debt will exceed value so that the property basis for tax credit purposes is not unnecessarily restricted.
Payments on secondary debt are restricted to 75% or less of annual surplus cash as documented in HUD Surplus Cash Note (92223M)
Total combined private secondary debt may not exceed the limit of 100% of total project costs (Public secondary debt is not included in the calculation) and will be subject to automatic resubordination in the event of refinancing the first mortgage
The maturity date of the secondary debt must be coterminous with the first mortgage
NH&RA Summer Institute 

8. Recent Issues NH&RA Summer Institute EBL
MAP Guide does not allow the GP to pledge its security interest to secure bridge loan
Memo issued March 8, 2018 stating HUD will allow this structure. Other guidance in MAP remains unchanged
Interagency Hurdles
CPD - Environmental clearance
DOL – split wage decisions
Timing
Affordable deals take less time than market rate
Scattered sites
Must be within 15 – 20 miles from each other. Must be one marketable, manageable real estate entity.
NH&RA Summer Institute 

9. Recent News NH&RA Summer Institute 221(d)(4) Pilot
The pilot is in the final clearance phase. Expect implementation in the near future.
RAD – PRAC
Section 202 Project Rental Assistance Contracts are eligible for conversion under RAD. HUD is currently writing guidance for restructuring and conversion.
NH&RA Summer Institute 

10. Jennifer Doran Massey, Chief Underwriter 242 Inverness Center Drive
Birmingham, AL 35242
(205) Office
(205) Cell
NH&RA Summer Institute