FHA 221(d)(4) Program
Eligible Property: New Construction or substantial rehab. Multifamily rental properties and cooperatives. All units must contain full kitchens or kitchenettes and bathrooms. Properties must meet all building and other local code requirements including properties requiring Credit Enhancement for bond, LIHTCs and affordable housing transactions.
Loan Term and Amortization: Construction Period, Plus 40-years – fully amortizing.
Maximum Loan Amount:
- Market Rate Properties: Maximum Loan to Costs: 85% (can include a 10% builder/Developer Credit) with a Minimum DSCR 1.176x
- Affordable – Maximum Loan to Costs 87% to 90% with a Minimum DSCR 1.11x -1.15x
Eligible Borrower: Single Asset Entity (for profit or non-profit)
Escrows: Monthly deposits required for RE Taxes, Property Insurance, MIP and replacement reserves. Escrows will be required for working capital (4% of mortgage amount) and for initial operating deficit.
Recourse: Non-recourse – Construction and Permanent – subject to Bad Boy carve-outs.
Commercial Space: Maximum 25% of gross floor area and maximum 15% of effective gross income
Required Reports: Market Study, Appraisal, Architect/Cost Review and Phase I. CPA reviewed
financial or last fiscal year – sub rehab.
Prepayment: Negotiable. Generally two-year lockout with a 10% to 1% declining pre-payment penalty. Other pre-payment options available.
Assumable: Subject to Arbor and HUD approval and payment of assumption fee.
Good Faith Deposit: Negotiable based on project type
Expense Escrow: Yes – sufficient to cover Arbor’s expenses and third-party report costs
Origination Fee: Negotiable
HUD Application Fee: Non-refundable fee of $3 per $1,000 (0.3%) of the mortgage amount due to HUD with the firm commitment submission package. For market rate pre-applications, V72016 a non-refundable review fee of 15 bps (50% of the firm commitment application fee) is due to HUD with the submission of the pre-application package.
HUD Inspection Fee: 0.5% of the mortgage amount for new construction. 0.5% of the cost of the repairs for substantial rehab.
Legal/Closing Fee: Borrower pays Lender’s counsel fee and miscellaneous closing costs.
Rehabilitation Qualifications: Repairs must exceed $15,000 per unit (adjusted for local high cost factor), 15% of the “as rehabbed” appraised value or replacement of 2 or more major building systems.
Davis Bacon Applies: Davis Bacon labor standards and wage requirements apply to construction and rehab work.
HUD Mortgage Insurance Premium Annual MIP Rates:
- Market Rate Properties: 0.65%
- Affordable Properties: 0.35%
- Broadly Affordable or Energy Efficient Properties: 0.25%