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Glossary
Last updated on Sep 22, 2022
2 min read

What is a Bankruptcy Remote Entity?

Amortizing loans are loans in which part of each payment goes toward interest and part goes toward paying off the principal. In most cases, the the bulk of early monthly payments go toward interest, while the bulk of the later payments go toward the principal. HUD 223(f) loans are fully amortizin

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In this article:
  1. Bankruptcy Remote Entities and HUD 223(f) Loans
  2. How are Bankruptcy Remote Entities Structured?
  3. The Downsides of Bankruptcy Remote Entities
  4. Get Financing

Bankruptcy Remote Entities and HUD 223(f) Loans

HUD 223(f) borrowers are required to structure their borrowing entity as a bankruptcy remote entity. This means that, if the borrowing entity’s parent company declares bankruptcy, it will not likely affect the financial status of the borrowing entity itself. This protects both the borrower, lender, and HUD from any unexpected financial complications.

How are Bankruptcy Remote Entities Structured?

In order to be bankruptcy remote, an entity will often be structured as a special purpose entity (SPE), also often known as a single asset entity (SAE), since these entities typically only hold one asset- a piece of multifamily real estate. SPEs are usually themselves structured as limited partnerships (LPs), or limited liability companies (LLCs).

The Downsides of Bankruptcy Remote Entities

While bankruptcy remote entities have a variety of major upsides for borrowers and lenders, they do have one major downside; in most cases, if a property is losing money, the borrower cannot inject cash into the property in order to save it from foreclosure. However, they may be able to get a HUD 223(d) operating loss loan in order to inject some cash into the property and give it time to stabilize.

TO LEARN MORE ABOUT FHA 223F LOANS, FILL OUT THE FORM BELOW AND A HUD LENDING EXPERT WILL GET IN TOUCH. 

In this article:
  1. Bankruptcy Remote Entities and HUD 223(f) Loans
  2. How are Bankruptcy Remote Entities Structured?
  3. The Downsides of Bankruptcy Remote Entities
  4. Get Financing
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  • HUD 223(f) Loans
  • HUD 223(f) Loan
  • HUD Affordable Properties
  • HUD 223(f) Amortization
  • Bankruptcy Remote Entity
  • Special Purpose Entity
  • SPE
  • SPV
  • Single Asset Entity

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