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U.S. Department of Housing & Urban Development (HUD) has just implemented debt service reserve requirements on 223(f) refinance and acquisition loans for existing multifamily properties in response to the economic instability and increased risk environment caused by COVID-19.  This requirement will remain in effect until such time HUD deems the associated risks mitigated.

Generally, under the new rules, a 9-month reserve will now be required on market rate projects and up to a 12-month reserve will be required on affordable projects. LIHTC projects with similar reserve facilities required by the tax credit investor that are available to cover the HUD loan debt service requirements may offset the HUD debt serve reserve requirement, subject to HUD approval on a case by case basis.  Projects with Section 8 project-based rental assistance covering greater than 90% of units will be exempt from the debt service requirement.  The debt service reserve will be eligible for release 6 months post-closing after the project achieves 3 consecutive months of underwritten debt service coverage.

Additional details are provided in the formal HUD publication: HUD Mortgagee Letter 2020-11.  Give us a call for more information or to learn more about HUD loan programs. 

Interested in learning more about FHA's attractive 223(f) refinance loan program?
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The Fed has taken extraordinary steps to provide liquidity in the market through the expansion of its QE policies in response to the fallout from the novel Coronavirus.  The Fed tossed its previous commitment to purchase $700 billion in Treasuries and agency MBS in favor of an open-ended program, pledging asset purchases with no limit to support markets.  With the acceleration of Treasury and agency MBS purchases, the Fed’s balance sheet has ballooned to record levels, now above $5 trillion. The immediate impact on interest rates have been positive as spreads have come down, although the situation remains fluid.  Check out today’s rates.

FHA Commercial Loan Rate Update – April 03, 2020

• 35-year fixed FHA perm loans: 2.60%-2.85%
• 40-year fixed FHA construction/perm loans: 3.35%-3.60% 

These pricing indications are current as of the date posted, subject to market interest rate volatility.  Pricing of FHA insured apartment and healthcare loans may be dependent on loan size and other risk factors. Call for more information.

Interested in learning more about FHA's attractive 223(f) refinance loan program?
Click to learn more!