ACQUISITION AND REFINANCING OF MULTIFAMILY PROPERTIES

FHA Section 223(f) Mortgage Insurance Program

ELIGIBLE MULTIFAMILY PROJECT

1.      Market rate, moderate-income and subsidized properties

2.      Existing projects, at least three years old, with no more than minimal required levels of repair and with no substantial rehabilitation within the past three years

3.      No rent control

4.      Student housing is not excluded, but multiple rents from one unit will not be underwritten

5.      Limitation on commercial space: no more than 20% of net rentable area and 20% of effective gross income

BORROWER

Single-asset entity

LOAN AMOUNT

Minimum loan amount of $2 million and no maximum
(Additional programs available

INTEREST RATE

The interest rate is fixed for the term of the loan

LOAN PARAMETERS

The maximum loan amount for New Construction is the least of:

A.          85% of appraised value

B.          Loan amount that would achieve a debt service coverage ratio of 1:18 to 1.0

C.          Refinancing: 100% of outstanding debt plus transaction costs and proposed repairs. (If an equity take out is being requested, then the loan amount may be 80% of the project’s appraised value under this loan criterion if that amount is greater than the cost of the refinance)

D.          Acquisition: 85% of the acquisition price plus transaction costs and proposed repairs

RECOURSE

Non-recourse

TERM AND AMORTIZATION

Maximum term of 35 years; loan will fully amortize over term

PREPAYMENT

Negotiable. Typically two-year lockout with 8% penalty in the third year, reducing 1% each succeeding year.

INTEREST RATE SET

After acceptance of El-IA commitment and prior to closing (contact Pete Mitchell to discuss early rate lock options)

ASSUMABLE

Loan is assumable, subject to HUD approval and payment of an assumption fee and related transaction expenses

FEES AND EXPENSES

1.            FHA Application Fee of 0.3% of the loan amount, due at application

2.            FHA Mortgage Insurance Premium: 1% of the loan amount paid at closing. Thereafter, annual mortgage insurance premium of 0.45% paid with monthly mortgage payments.

3.            Fl-IA Inspection Fee: the greater of $30 per unit or 1% of the cost of repairs where repairs are more than $3,000 per unit, paid at closing, to cover physical inspections of the property.

4.            Financing and Permanent Placement fees: up to 3.5% of loan amount, paid at closing.

5.            Third party report cost

ESCROWS

1.      Replacement Reserves are required in accordance with HUD guidelines; the amount is determined in conjunction with the third-party engineer report.

2.      Taxes and insurance are required to be escrowed monthly

PROCESSING AND TIMELINE

Application to HUD is typically submitted within 45 to 60 days from engagement and HUD has

60 days from receipt to approve the application for firm commitment.

After acceptance of El-IA commitment and prior to closing (contact Pete Mitchell to discuss early rate lock options)

Contact:
Pete Mitchell
Loans@PeteMitchell.com
949-766-3921