Replacement Reserves and the HUD 223(f) Loan Program
Replacement reserves consist of money earmarked for replacing building components and equipment which will wear out over the course of time. Replacement reserves are required for all properties funded with HUD multifamily loans, including those funded with HUD 223(f) loans. HUD 223(f) financed properties require a minimum of $250/unit per year in replacement reserves. However, the exact amount required will be determined by a project capital needs assessment (PCNA.) Required replacement reserves are placed in escrow on a monthly basis, along with other expenses, such as taxes and property insurance.