HUD 223(f) Loan

What is Loan-to-Value Ratio (LTV)?

What is Loan-to-Value Ratio (LTV)?

A loan-to-value or LTV ratio is a metric that compares the size of a loan to the value of the asset. Higher LTVs are generally riskier for lenders, and, for certain loans, can result in higher interest rates. When it comes to HUD 223(f) loans, HUD permits up to 85% LTV for market rate properties, up to 87% LTV for affordable properties, and up to 90% LTV for properties using rental assistance

What is Loan-to-Cost Ratio (LTC)?

What is Loan-to-Cost Ratio (LTC)?

Loan-to-Cost Ratio, or LTC, is a measure of leverage defined as project’s financing compared to its construction costs. LTC is important for some kinds of HUD multifamily financing, including HUD 221(d)(4) loans and HUD 232 loans, but is not a relevant factor for HUD 223(f) loans, since these loans do not fund property construction or rehabilitation.

What is an Interest-Only Fixed Rate Loan?

What is an Interest-Only Fixed Rate Loan?

Interest-only fixed rate loans are loans in which the borrower pays only interest at a fixed rate and nothing towards the principal of their mortgage loan. Interest-only fixed rate loans are a component of certain HUD multifamily loan programs, such as HUD 221(d)(4) loans for the construction and substantial rehabilitation of multifamily properties.

What is a HUD-Held Loan?

What is a HUD-Held Loan?

HUD-held loans are loans that were originally insured by HUD, and are now owned by HUD itself. HUD-held loans are different than HUD-owned properties, as these are properties in which the title of the property is now held by HUD as the result of a borrower foreclosure.

What is a HUD-Approved Lender?

What is a HUD-Approved Lender?

HUD-approved lenders are those that can offer HUD multifamily financing and other HUD-insured home loans to borrowers. In order to qualify to become a HUD-approved lender, a lender must meet specific requirements, including having a specific net worth, maintaining good credit, and having employees with a certain amount of experience in the mortgage industry.

What is the Department of Housing and Urban Development (HUD)?

What is the Department of Housing and Urban Development (HUD)?

Founded by President Lyndon Johnson in 1965, the U.S. Department of Housing and Urban Development is part of the Executive Cabinet. HUD develops, oversees, and executes housing policies, specifically in regards to affordable and sustainable housing.

What are GNMA (Government National Mortgage Association) Mortgage Backed Securities?

What are GNMA (Government National Mortgage Association) Mortgage Backed Securities?

Ginnie Mae (Government National Mortgage Association - GNMA) guarantees payments on mortgage backed securities consisting of pools of government-insured loans, including HUD 223(f) loans. While Ginnie Mae guarantees repayment on the MBS, it does not issue, sell, or buy securities itself and does not purchase mortgages.

Fixed-Rate Loans and the HUD 223(f) Loan Program

Fixed-Rate Loans and the HUD 223(f) Loan Program

Fixed-rate loans are those loans with monthly payments at fixed interest rates. While FHA-insured mortgages for single family homes typically come in both fixed and adjustable-rate versions, FHA/HUD-insured multifamily loans, such as the HUD 223(f) loan, are always fixed-rate.

What are FHA-Insured Loans

What are FHA-Insured Loans

FHA-insured loans are loans that are backed by FHA mortgage insurance (see also HUD-Held) mortgages). The FHA insures both single family home mortgages, through its 203(b) and 203(k) loan programs, and multifamily mortgages, through programs including the HUD 223(f), HUD 221(d)(4), and HUD 232 loan programs.

What is FHA Mortgage Insurance?

What is FHA Mortgage Insurance?

FHA mortgage insurance protects against loan defaults and decreases risk for lenders. In the event of default, the FHA mortgage insurance pays claims based on certain requirements. FHA mortgage insurance is available for both single-family homes, through programs such as the 203(b) and 203(k) insurance programs, and for multifamily properties, through programs including the HUD 223(f) loan program for the acquisition and refinancing of multifamily properties.

What is the Federal Housing Administration (FHA)?

What is the Federal Housing Administration (FHA)?

The Federal Housing Administration was created in 1934 by the National Housing Act, in order to promote home construction and reduce unemployment. The FHA operates a range of loan insurance programs, but builds no properties and makes no loans.

Escrow in Relation to HUD 223(f) Loans

Escrow in Relation to HUD 223(f) Loans

Assets in escrow are those held by a third party on behalf of two other parties prior to the completion of a transaction. Examples of things held in escrow are money, funds, and securities. When it comes to HUD 223(f) loans, a loan will typically require an escrow account to hold funds during the closing process. In addition, HUD 223(f) loans require funds for taxes, insurance, and replacement reserves to escrowed on a monthly basis.

What is DSCR (Debt Service Coverage Ratio)?

What is DSCR (Debt Service Coverage Ratio)?

DSCR is a metric used by lenders to determine loans on income-generating properties. It is the required cash flow for paying current debts (interest, principal, lease payments, etc.), plus a certain margin of safety. DSCR can be calculated by taking a property’s net operating income (NOI) and dividing it by the property’s annual debt service.

Commercial Mortgage Backed Securities (CMBS) in Relation to HUD 223(f) Loans

Commercial Mortgage Backed Securities (CMBS) in Relation to HUD 223(f) Loans

CMBS loans are commercial and multifamily real estate loans that are pooled into securities and sold to investors on the secondary market. CMBS stands for commercial mortgage backed security. These securities may consist of loans for properties such as hotels, apartment buildings, office buildings, hospitals, or other types of income-producing commercial real estate assets.

What is the Davis-Bacon Act?

What is the Davis-Bacon Act?

Established under the 1931 Davis-Bacon Act, some public works projects must pay workers the local prevailing wages— not simply the minimum wage. Required by many HUD programs, it is overseen by HUD’s Office of Labor Relations Davis-Bacon compliance. Fortunately for borrowers, HUD 223(f) loans typically do not require that workers be paid Davis-Bacon wages for any rennovation or repair work.

What is Cooperative Housing?

What is Cooperative Housing?

Cooperative housing, also known as a housing cooperative, co-op, or housing companies, are membership-based cooperatives (or corporations) that own real estate. These usually consists of one or more residential buildings. Cooperative housing developments can be refinanced with a special variant of HUD 223(f) loans, the HUD 223(f) cooperative housing loan.

What are is the California Housing Finance Agency (CalHFA)?

What are is the California Housing Finance Agency (CalHFA)?

The California Housing Finance Agency, also known as CHFA, is an independent California state agency that focuses on helping increase the amount of affordable housing in California. CalHFA does this by issuing bond-backed home loans, multifamily loans and assistance to multifamily developers. 

What are CHAMP Funds?

What are CHAMP Funds?

Competitive Housing Assistance for Multifamily Properties, is an initiative developed by the Connecticut Department of Housing (DOH), in order to increase the amount of affordable housing in Connecticut. The program assists developers in getting loans and grants, and may be combined with 4% low income housing tax credits (LIHTCs). 

What is a Bankruptcy Remote Entity?

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 amortizing, which means that the loan’s principal will be fully paid off by the end of the loan’s term.