Multifamily Market Rate/ Multifamily Affordable - MHCs
HUD 232 223(f) Program
Fannie Mae Standard Mortgage
Freddie Mac Standard Program
Bridge
HUD 223(f)– Refinance/ Purchase Program
Program: A HUD 223(f) is designed for the refinance/purchase of a property consisting 5 or more rental units
Highlights:
· 35-year fixed term or up to 75% of building’s economic useful life
· Non-Recourse loan
· Assumable
· Rate Locked for life of Loan
Maximum Loan is the lesser of:
1. Percentage of Value (% constraint noted below)
2. Debt Service Coverage (DSCR constraint noted below)
3. Statutory Limits
4. Cashout restraint of 80%
Appraised Value or Acquisition Cost multiplied by(as performed by appraiser according to HUD SOW)
· 90% for projects with 90% or greater rental assistance
· 87% for affordable housing transactions, as defined as
o 20% of units at 50% AMI
o 40% of units at 60% AMI
· 85% for market rate projects
· 80% for cash out transactions (50% of cashout will be held in escrow to be released upon completion of all identified immediate repairs).
Debt Service Coverage
· 1.11x or 90% of NOI for projects with 90% or greater rental assistance
· 1.15x or 87% of NOI for affordable housing transactions
· 1.176 or 85% of NOI for market rate projects
Statutory Limits
· Per unit maximums as determined by the Federal Housing Administration and noted in the Federal Registrar. These per unit maximums are differentiated by elevator/non-elevator buildings, and multiplied by an area high cost factor. These high cost factors are updated routinely by the Department.
Non-mortgageable Costs
· An additional 20% of the estimated repairs, for repairs not completed before the loan closing, will be held in escrow until the repairs are completed.
Typical Processing Steps
· Concept Meeting with HUD
· Firm Application Submitted – will include:
o Final Appraisal, Property Capital Needs Assessment, Phase 1 Environmental Assessment
o Financials and/or credit information on sponsor and management company
o Three years of tax returns for the project and borrowing entity
o Property Financial Statement that is reviewed by an independent third-party CPA.
o Past due accounts payable and outstanding liabilities
o Verified working capital sufficient to meet all closing requirements
o Management Documents
o Evidence of site
Fannie Mae Standard Program
Program: A Fannie Mae mortgage provides a first lien permanent loan financing for acquisition and or refinancing multifamily properties.
Highlights / Benefits:
· Flexible Financing
· Certainty and Speed of execution
· Competitive Pricing
· Speed in processing and underwriting
Eligibility:
I. Existing Apartments, stabilized conventional, affordable housing, senior housing, student housing, and manufactured housing communities
II. Properties must have a minimum of five units (50 pads sites for manufactured housing communities)
III. Credit-worthy single-asset US borrower with all US principals
IV. Borrower may also have foreign ownership interests, subject to proper structuring of borrowing entity
Loan Size $750,000 and up
Term 5 to 30 years
Amortization up to 30 years
Maximum LTV 80% (75% cash-out), subject to underwriting and appraisal review
Minimum DSCR 1.25x nationally. Waiver for lower DSCR is subject to FNMA approval
Application Fee $12,000 to $15,000 (covers all underwriting costs, third party reports (Appraisal, Phase I / ESA, Property Needs Assessment). *Processing Fee is $7,500 for the Small Balance Program.
Origination Fee Negotiable
Recourse Non-Recourse execution is available for most loans greater than $750,000. Standard carve-outs for “bad-acts” such as fraud and bankruptcy are required.
Escrows Replacement reserves, taxes, and insurance are all typically required.
Rate Lock A rate lock deposit is taken in advance of closing and refunded post close, amount % and $ depends on loan size.
Closing 45 to 60 days from receipt of completed application
Prepayment Yeild Maintenance and other graduated prepayment options available
Typical Processing Steps
o Appraisal, Property Capital Needs Assessment, Phase 1 Environmental Assessment
o Financials and/or credit information on sponsor and management company
o Three years of tax returns for the project and borrowing entity
o Property Financial Statement that is reviewed by an independent third-party CPA.
o Past due accounts payable and outstanding liabilities
o Verified working capital sufficient to meet all closing requirements
o Management Documents
o Evidence of site control/last arm’s length transaction
o Legal Documents (organizational docs, title)
o Rent Rolls
Freddie Mac Standard Program
Program: A Fannie Mac fixed rate loan provides a first lien financing for acquisition and or refinancing multifamily properties.
Highlights / Benefits:
· Flexible Financing
· Certainty and Speed of execution
· Competitive Pricing
· Speed in processing and underwriting
Eligibility:
I. Existing Apartments, stabilized conventional, affordable housing, senior housing, student housing, and manufactured housing communities
II. Properties must have a minimum of five units (50 pads sites for manufactured housing communities)
III. Credit-worthy single-asset US borrower with all US principals
IV. Borrower may also have foreign ownership interests, subject to proper structuring of borrowing entity
Property Must have stabilized occupancy 90% for 90 days
Loan Size $1,000,000 and up (non-small balance loans start at $5,000,000)
Term 5 to 30 years
Amortization up to 30 years
Maximum LTV 80% (75% cash-out), subject to underwriting and appraisal review
Minimum DSCR 1.25x nationally. Waiver for lower DSCR is subject to FNMA approval
Application Fee $12,000 to $15,000 (covers all underwriting costs, third party reports (Appraisal, Phase I / ESA, Property Needs Assessment).
Origination Fee Negotiable
Freddie Fee Greater of $2,000 or 0.1% of loan amount for conventional first mortgages; seniors housing loans are > $5,000 or 0.15% of loan Amount.
Recourse Non-Recourse. Standard carve-outs for “bad-acts” such as fraud and bankruptcy are required.
Escrows Replacement reserves, taxes, and insurance are all typically required.
Rate Lock A rate lock deposit is taken in advance of closing and refunded post close, amount % and $ depends on loan size.
Closing 45 to 60 days from receipt of completed application
Prepayment Yield Maintenance and other graduated prepayment options available
Typical Processing Steps
o Final Appraisal
o Property Capital Needs Assessment
o Phase 1 Environmental Assessment
o Financials and/or credit information on sponsor and management company
o Three years of tax returns for the project and borrowing entity
o Property Financial Statement that is reviewed by an independent third-party CPA.
o Past due accounts payable and outstanding liabilities
o Verified working capital sufficient to meet all closing requirements
o Management Documents
o Evidence of site control/last arm’s length transaction
o Legal Documents (organizational docs, title)
o Rent Rolls
Available for Value Add Transactions
Cash-out transactions
Timing Transactions