---
title: FHA / HUD Eliminates 3-Year Rule
description: HUD Eliminates 3-Year Rule Allowing for Refinances of Multifamily New Construction
image: https://www.adroccap.com/hubfs/Apartment%20New%20Contruction%20%28low%20res%29.png
---

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![FHA / HUD Eliminates 3-Year Rule Allowing for Refinances of Multifamily New Construction](https://www.adroccap.com/hubfs/Apartment%20New%20Contruction%20%28low%20res%29.png)

## [FHA / HUD Eliminates 3-Year Rule Allowing for Refinances of Multifamily New Construction](https://www.adroccap.com/trending/fha-3-year-rule)

 by [Avi Brum, CEO](https://www.adroccap.com/trending/author/avi-brum-ceo) | Mar 04, 2020 | [HUD Updates](https://www.adroccap.com/trending/tag/hud-updates)

U.S. Department of Housing & Urban Development (HUD) announced this week that it has revised its long-held policy requiring a three-year wait period following construction completion before accepting HUD-insured refinance applications for multifamily properties.  Under the new rules recently constructed multifamily properties are now eligible for a [HUD 223(f) refinance](https://www.adroccap.com/fha/223f) upon achieving stabilization. 

Eligible properties must achieve the underwritten income and expense levels and debt service coverage ratio for a period of at least three consecutive months prior to closing.  Cash-out refinances have the additional limitation requiring a 50% hold-back until the project achieves six months consecutive performance at these levels.   The full details are published in [Mortgagee Letter 2020-03. ](https://www.hud.gov/sites/dfiles/OCHCO/documents/20-03hsgml.pdf)

The [HUD 221(d)4 loan](https://www.adroccap.com/fha/221d4) has traditionally been one of best new construction/sub-rehab loans available in the market, with its long-term, low interest rate financing covering up to 90% of development cost.  However, its Achilles heel has been its [Davis Bacon wage requirements](https://www.adroccap.com/fha/221d4#Davis-Bacon) along with longer processing time which have discouraged some developers. With the elimination of the 3-year rule for multifamily properties, conventionally financed developments can still benefit from HUD's attractive long-term, low interest rate financing.

Give us a call for more information or to learn how HUD loan programs can benefit your real estate investment. 

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