What is the Department of Housing and Urban Development (HUD)?
The Department of Housing and Urban Development, otherwise known as HUD, is a cabinet department in the executive branch of the U.S. government, with the stated mission of helping address America's need for housing and enforcing fair housing regulations across the country. As part of its mission, HU
HUD Multifamily Loans and the HUD 223(f) Loan Program
The Department of Housing and Urban Development, otherwise known as HUD, is a cabinet department in the executive branch of the U.S. government. It's mission is helping address America's need for housing and enforcing fair housing regulations across the country. As part of its mission, HUD provides mortgage insurance for a variety of different types of loans offered by private lenders, including HUD 223(f) multifamily acquisition and refinancing loans.
What Other Kinds of Loans Does HUD Insure?
In addition to the HUD 223(f) program, HUD insures loans for single-family homes, and multifamily loans under programs including:
HUD 221(d)(4): Loans for the new construction and substantial rehabilitation of multifamily properties.
HUD 232 and 232/223(f): Loans for the new construction, substantial rehabilitation, acquisition, and refinancing of senior living facilities, including assisted living facilities, skilled nursing facilities, and Alzheimer's/Dementia care facilities.
HUD 223(a)(7): Refinancing for current HUD multifamily loan borrowers.
HUD 241(a): Supplemental loans for current HUD multifamily loan borrowers.
What is the purpose of the Department of Housing and Urban Development (HUD)?
The U.S. Department of Housing and Urban Development (HUD) was founded by President Lyndon Johnson in 1965 and is part of the Executive Cabinet. HUD's purpose is to develop, oversee, and execute housing policies, specifically in regards to affordable and sustainable housing. HUD also insures a variety of loan programs, including the HUD 223(f) loan for the acquisition and refinancing of multifamily properties. Additionally, HUD works with the Federal Housing Administration (FHA) to insure FHA multifamily construction loans in order to create more affordable housing around the U.S.
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What services does HUD provide?
The U.S. Department of Housing and Urban Development (HUD) is a department of the executive branch of the U.S. government tasked with improving the accessibility of housing for all Americans. As part of their mission, HUD insures a variety of loans, including FHA mortgages for single family homes, as well as multifamily loans for apartment buildings and healthcare facilities. HUD also provides loan insurance for single family homes and apartment properties with up to four units through the Federal Housing Administration (FHA).
HUD's role in healthcare financing includes insuring mortgages under the HUD 232 loan program. This allows for the construction and significant rehabilitation of assisted living, skilled nursing, and memory care properties for senior citizens. HUD also insures mortgages under the HUD 232/223(f) program, which allows for the acquisition and refinancing of those same property types. In comparison, the HUD 242 loan program is designed for financing hospitals, including acute care facilities, critical access hospitals, large urban teaching hospitals, and both non-profit, for-profit, and government-owned hospital facilities.
HUD also provides loan insurance for single family homes and apartment properties with up to four units through the Federal Housing Administration (FHA).
What is the HUD 223(f) program?
The HUD 223(f) program finances the acquisition and refinancing of eligible multifamily projects. It can be used for apartment buildings, eligible mixed-used properties, and independent living facilities for senior citizens. For more information, you can read here or download our easy-to-understand HUD 223(f) loan term sheet here.
What are the eligibility requirements for HUD 223(f) financing?
In general, to be eligible for HUD 223(f) financing, a property must have 5+ residential units, complete kitchens and bathrooms for each unit, can be row, walkup, detached, semi-detached, or elevator-type rental or cooperative housing, can be market-rate, affordable, or rental assisted/subsidized, cannot be an assisted living, skilled nursing, or memory care property, and must have all construction and major rehabilitation finished three or more years before beginning the HUD loan application process.
In addition, HUD 232/223(f) financing requires that the project must house 20 or more residents, provide ongoing medical care for long-term patients, be licensed by the appropriate municipal or state organization/agency, have no more than 20% of the project's gross area or gross income devoted to/derived from non-resident day care, have no more than 25% of all units designated as independent living units, and have no more than 20% of the gross floor space filled and no more than 20% of the property's income derived from commercial tenants.
Loans greater than $75 million are subject to stricter DSCR constraints and more conservative leverage, HUD 223(f) multifamily financing can be used with LIHTCs (Low-Income Housing Tax Credits), HUD 223(f) loans can be used for refinancing or purchasing Section 202, Section 236, and Section 8 funded properties, a PCNA (Project Capital Needs Assessment) must be completed every 10 years, and Davis-Bacon prevailing wage rules are not applicable to repairs.
What are the benefits of HUD 223(f) financing?
HUD 223(f) loans offer some of the best terms in the industry for the acquisition and refinancing of multifamily and apartment properties. These loans are non-recourse, offer high leverage, low interest rates, and lenient DSCR requirements.
The terms of HUD 223(f) loans are as follows:
Loan amount Terms Leverage Interest rates DSCR requirements $1 million, no set maximum Between 10 and 35 years Up to 85% LTV for market-rate properties, 87% LTV for affordable properties, 90% LTV for properties using rental assistance. Fixed for the life of the loan. Includes a mortgage insurance premium, or MIP. 1.18x for market-rate properties, 1.15x for affordable properties, and 1.11x for rental assistance properties.