Housing and Urban Development (HUD)

FHA Financing

Strong Communities, Stronger Partnerships

As the #1 FHA-insured multifamily lender nationwide for 2023, Berkadia FHA/HUD has the vision and versatility to create customized debt and equity solutions to fit all project sizes, locations, and borrower profiles. Our dedicated Housing and Urban Development professionals are skilled in navigating the lending process on behalf of our clients, covering major HUD multifamily programs including 221(d)(4), 220, 223(f), 241(a), 223(a)(7), and IRR Loan Modification.  

With a presence in every major market nationwide, serving in leadership roles on both Regional HUD Boards and MBA FHA Committees, Berkadia FHA/HUD has unique access and insight into FHA financing that we put to work for our clients. 

THANKS FOR JOINING US AT THE

2024 MBA
Commercial / Multifamily Finance Convention & Expo

San Diego, CA 
February 11-14, 2024
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Insights

HUD Loan Programs: Consistency in an Unpredictable Market

“Investors oftentimes find it challenging to navigate a high interest rate environment. However, an FHA-insured loan provides flexibility, allowing borrowers to uncover significant cost savings. Our dedicated team of HUD professionals continues to guide clients through the complexities of today’s market amid record high rates and economic turbulence.”

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BERKADIA FHA/HUD CONSTRUCTION

Berkadia FHA/HUD Construction manages all 221(d)(4) and 223(f) projects, including heavy repairs. We have consistently been ranked as the Top HUD Multifamily New Construction/Sub-Rehab Lender by volume from 2018-2022. Our automated processes and industry-leading technology allow our construction experts to prioritize your project and proactively monitor all aspects of the HUD process.

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Track Record

Transaction
Volume
$1.2B
in HUD loans financed in 2023 across
49 transactions
FHA-Insured
Lender
#1
HUD lender
nationwide
in 2023
Multifamily
Lender
#1
HUD multifamily
lender in 2023
New construction
Lender
#1
HUD new construction lender in 2023
Multfamily
Affordable Lender
#1
HUD multifamily affordable lender
in 2023
Multifamily
Refinance
#2
HUD multifamily
refinance lender
in 2023

Integrated Solutions

Mortage Banking

Your projects, of any size and location, benefit from best-in-class financing partners and unparalleled access to capital.

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Investment Sales

When you equip the right professionals with industry-leading insights and tools, the result is better investment outcomes.

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Loan Servicing

Get customized solutions and seamless service with our established resources and proven expertise.

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Technology

Change your decision-making process with actionable insights backed by our powerful data.

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Find a Partner.

Search our people to find a partner aligned with your needs.

Featured Recent Closings

Roanoke, VA

HUD 223(f)
Refinance

Connect with Laura Smith

Lexington, NC

HUD 221(d)(4)
Substantial Rehabilitation

Connect with Matt Baptiste

Texas City, TX

HUD 223(f)
Refinance

Connect with Tim Leonhard

San Diego, CA

HUD 223(f)
Refinance

Connect with Jeff Hall

Pasco, WA

HUD 221(d)(4)
Development/Construction

Connect with Monica Newman

Fort Collins, CO

HUD 221(d)(4)
Development/Construction

Connect with Jennifer Quigley

Fort Walton Beach, FL

HUD 223(f)
Refinance

Connect with Eben Williams

Brooklyn, NY

HUD 232/223(f)
Refinance

Connect with Ed Williams

“For more than a decade, Berkadia’s team of industry trailblazers have guided clients through the intimidating, yet rewarding, world of FHA financing. Nationwide, our experts serve as committed partners, equipped with the tools, knowledge and relationships to help achieve your goals.”

Steve Ervin
Senior Vice President &
Head of FHA Financing

RESEARCH, INSIGHTS and News

Access the latest market-driven insights, research and news from Berkadia.

Insights

Berkadia Ranks #1 HUD Lender Nationwide in 2023

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News

19th & Graf Apartment Homes, Bozeman MT | Financed by Berkadia 2023

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News

Senior Housing Communities | Financed by Berkadia 2023

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Insights

The Advantages of HUD-Insured Loans

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FHA/HUD Programs

Berkadia FHA/HUD 221(d)(4) and 220 Loan Program

Download Program Details | Connect with a Mortgage Banker

NEW CONSTRUCTION AND SUBSTANTIAL REHABILITATION

  • High leverage construction/permanent financing
  • Permanent interest rate locked prior to construction
  • Interest rate modification program available post completion

Market Rate Properties

  • Maximum 85% loan-to-cost
  • 1.176x DSCR with 7% vacancy
  • Statutory mortgage limitation (per unit)

Affordable Properties
(LIHTC Minimums)

  • Maximum 87% loan-to-cost
  • 1.15x DSCR with 5% vacancy
  • Statutory mortgage limitation (per unit)

Rent Assisted Properties
(Section 8)

  • Maximum 90% loan-to-cost
  • 1.11x DSCR with 5% vacancy
  • Statutory mortgage limitation (per unit)

Interest Rate and Term

  • Fixed interest, same rate for construction and permanent phases
  • Construction phase +40-year permanent amortization
  • Interest only during construction
  • Fully amortizing
  • Conversion to permanent phase at construction completion (no DSCR test for conversion)

Prepayment

  • Flexible 10 year prepayment structure

Additional Requirements

  • Davis-Bacon Act prevailing wages apply
  • New Construction Escrows
    (1) Working Capital: 4% of loan amount
    (2) Operating Deficit Escrow: 3% of loan amount
  • Substantial Rehab Escrows:
    (1) Working Capital: 2% of loan amount
    Waivable for certain Rent Assisted or LIHTC properties
  • Cost certification required for market rate properties
  • Limits on commercial income and space apply; 20% minimum vacancy

APPLICATION TIMELINE

Market Rate (Two-Stage Processing)

  • 30 days | Concept submission and meeting with HUD
  • 45-60 days | Pre-application underwriting by Berkadia (app, mkt study, phase I)
  • 45-60 days | HUD pre-application review
  • 45-60 days | Firm application underwriting by Berkadia (100% plans/specs)
  • 45-60 days | HUD firm application review
  • 45-60 days | Rate lock and closing

Affordable/Rent Assisted (Single-Stage Processing)

  • 45-60 days | Firm application underwriting by Berkadia
  • 45-60 days | HUD firm application review
  • 45-60 days | Rate lock and closing
HUD 221(d)(4) New Construction Loan Product Overview

Download Program Details | Connect with a Mortgage Banker

HUD 221(D)(4) NEW CONSTRUCTION LOAN
PRODUCT OVERVIEW

The HUD 221(d)(4) New Construction program provides a non-recourse, fully amortizing, fixed-rate assumable mortgage. The loan is structured as interest-only during the construction period linitial endorsement) where upon completion of construction and up to two months for cost certification (final endorsement), amortization will begin for a 40-year term. This program also allows for the substantial rehabilitation of existing properties to included adaptive reuse.

Loan Amount:

The HUD loan amount will be limited to the lowest of the following criterion:

  • 85% of: HUD approved mortgageable hard and soft construction costs plus the land value
  • Amount based on Limitations per Family Unit
  • Amount based on Debt Service Coverage (1.176x)

Interest Rate:

The interest rate can be locked upon HUD’s issuance of a Firm Commitment. The lender will work with Government National Mortgage Association (GNMA) investors to provide the borrower with the current market interest rate. A refundable rate lock deposit is required from the borrower that is to be credited at initial endorsement. The interest rate is locked for the entire term of both the construction period (plus two months for cost certification) and the 40-year permanent mortgage.

The construction and permanent interest are typically locked at the same rate. In certain circumstances, the GNMA investor may consider a split-rate where the construction interest rate is higher than the market rate allowing for a permanent rate to be below market. The availability of this option is dependent on the market conditions at the time of rate lock and whether this structure will be beneficial to the borrower.

Pre-Payment Period

The standard pre-payment penalty typically offered by GNMA investors is set for the initial ten years of the permanent mortgage. The most common structure declines 1% per year beginning at 10% in the first year. Alterations to this pre-payment structure can be negotiated with the GNMA investor based on the borrower’s needs. Any approved pre-payment penalty changes may have an impact on the market interest rate.

Rate Reset

Post Final Endorsement, if interest rates lower, there are options that allow the borrower to lower the interest rate of the 221(d)

(4) loan. This can be accomplished through an Interest Rate Reduction (IRR), or via the HUD 223(a)(7) program. Based upon the interest rate at the time and what the current pre-payment penalty is for the loan, the lender will present both options to the borrower and discuss if either is a viable and/or recommendable option at that time as well as if there are any other options that the borrower is trying to accomplish for the property.

Berkadia FHA/HUD 223(f) Loan Program

Download Program Details | Connect with Mortgage Banker

REFINANCE OR ACQUISITION

  • 35-year, fixed-rate financing
  • Ability to modify interest rate during term
  • High-leverage permanent financing

Market Rate Properties

  • 85% loan-to-value (80% if cash-out)
  • 1.176x DSCR with 7% vacancy
  • Statutory mortgage limitation (per unit)

Affordable Properties
(LIHTC Minimums)

  • 87% loan-to-value (80% if cash-out)
  • 1.15x DSCR with 5% vacancy
  • Statutory mortgage limitation (per unit)

Rent Assisted Properties
(Section 8)

  • 90% loan-to-value (80% if cash-out)
  • 1.11x DSCR with 3% vacancy
  • Statutory mortgage limitation (per unit)

Interest Rate & Term

  • 35-year rate (fully amortizing) subject to market conditions at time of rate lock

Prepayment

  • Flexible 10-year prepayment structure

Additional Requirements

  • Initial deposit to replacement reserve
  • Annual deposit to replacement reserve
  • Annual audited financial statements
  • Surplus cash distributions monthly

Heavy 223(f)

  • Non-critical repairs up to $40,000 per unit
  • Project architect required
  • Lender Needs Assessor reviews planned scope of work
  • Detailed plans of scope of work and cost estimate required
  • Davis-Bacon Act does not apply to Heavy 223(f)
  • General Contractor could be required

APPLICATION TIMELINE

Preliminary Loan Analysis

  • Initial loan sizing
  • Based on information provided by sponsor

Concept Submission and Meeting | 30 days Optional

  • Limited review of property information and sponsor
  • No third-party reports required

Berkadia Firm Application Underwriting | 45-60 days

  • Third-party due diligence
  • Collect required forms, certifications, and documents
  • CPA review of property operating statement for prior fiscal year
  • Obtain green certification, if applicable

HUD Firm Application Review | 45-60 days

  • HUD property inspection
  • National/regional loan committee review (depending on loan size)
  • HUD firm commitment

Closing (Final Endorsement) | 45-60 days

  • Interest rate lock
  • Closing and loan documents review
  • Completion of critical repairs
Berkadia FHA/HUD 241(a) Loan Program

Download Program Details | Connect with Mortgage Banker

FINANCE IMPROVEMENTS, ADDITIONS OR REPAIRS TO EXISTING FHA-INSURED PROPERTIES

  • Davis-Bacon Act not required when first mortgage is a 223(f)
  • Allows additional units to be built on contiguous sites

Market-Rate Properties

  • 90% loan-to-cost
  • 1.11x Debt Service Coverage
  • Statutory mortgage limitation (per unit)

Interest Rate and Term

  • Fixed rate (fully amortizing) subject to market conditions at rate lock
  • Coterminous with underlying first mortgage

Prepayment

  • Flexible 10-year prepayment structure

Additional Requirements

  • Davis-Bacon Act prevailing wages apply
  • New Construction Escrows:
    (1) Working Capital: 4% of loan amount
    (2) Operating Deficit Escrow: 3% of loan amount
  • Substantial Rehab Escrows:
    (1) Working Capital: 2% of loan amount
    Waivable for certain Rent Assisted or LIHTC properties
  • Cost certification required for market-rate properties
  • Limits on commercial income and space apply; 20% minimum vacancy

Other

  • Davis-Bacon Act requirements apply to the cost of improvements, additions or repairs only if the underlying first mortgage was subject to Davis-Bacon
  • A cross-default provision will be placed in the loan documents
  • If different lenders will service the first and supplemental loan, an agreement must be executed designating a single firm to hold and manage the reserve account

APPLICATION TIMELINE

Market Rate (Two-Stage Processing)

  • 30 days | Concept submission and meeting with HUD
  • 45 – 60 days | Pre-application underwriting by Berkadia (app, mkt study, phase I)
  • 45 – 60 days | HUD pre-application review
  • 45 – 60 days | Firm application underwriting by Berkadia (100% plans/specs)
  • 45 – 60 days | HUD firm application review
  • 45 – 60 days | Rate lock and closing

Affordable/Rent Assisted (Single-Stage Processing)

  • 45 – 60 days | Firm application underwriting by Berkadia
  • 45 – 60 days | HUD firm application review
  • 45 – 60 days | Rate lock and closing
Berkadia FHA/HUD 223(a)(7) Loan Program

Download Program Details | Connect with Mortgage Banker

REFINANCE OR ACQUISITION

  • 35-year, fixed-rate financing
  • Ability to modify interest rate during term
  • High-leverage permanent financing

Market Rate Properties

  • 85% loan-to-value (80% if cash-out)
  • 1.176x DSCR with 7% vacancy
  • Statutory mortgage limitation (per unit)

Affordable Properties (LIHTC Minimums)

  • 87% loan-to-value (80% if cash-out)
  • 1.15x DSCR with 5% vacancy
  • Statutory mortgage limitation (per unit)

Rent Assisted Properties (Section 8)

  • 90% loan-to-value (80% if cash-out)
  • 1.11x DSCR with 3% vacancy
  • Statutory mortgage limitation (per unit)

Interest Rate & Term

  • 35-year rate (fully amortizing) subject to market conditions at time of rate lock

Prepayment

  • Flexible 10-year prepayment structure

Additional Requirements

  • Initial deposit to replacement reserve
  • Annual deposit to replacement reserve
  • Annual audited financial statements
  • Surplus cash distributions monthly

Heavy 223(f)

  • Non-critical repairs up to $40,000 per unit
  • Project architect required
  • Lender Needs Assessor reviews planned scope of work
  • Detailed plans of scope of work and cost estimate required
  • Davis-Bacon Act does not apply to Heavy 223(f)
  • General Contractor could be required

APPLICATION TIMELINE

Preliminary Loan Analysis

  • Initial loan sizing
  • Based on information provided by sponsor

Concept Submission and Meeting | 30 days Optional

  • Limited review of property information and sponsor
  • No third-party reports required

Berkadia Firm Application Underwriting | 45-60 days

  • Third-party due diligence
  • Collect required forms, certifications, and documents
  • CPA review of property operating statement for prior fiscal year
  • Obtain green certification, if applicable

HUD Firm Application Review | 45-60 days

  • HUD property inspection
  • National/regional loan committee review (depending on loan size)
  • HUD firm commitment

Closing (Final Endorsement) | 45-60 days

  • Interest rate lock
  • Closing and loan documents review
  • Completion of critical repairs
Berkadia FHA/HUD IRR Loan Modification Program

Download Program Details | Connect with Mortgage Banker

HUD’s Interest Rate Reduction program is designed to reduce interest rates on existing FHA-insured properties. The IRR program allows owners to work with their current servicer to reset their existing mortgages at a lower interest rate, leading to significant savings.

Highlights

  • Interest rate is lowered to current market conditions.
  • Borrower legal fee is the only out-of-pocket cost.
  • A good faith rate lock deposit of 0.5% is credited back to the borrower at closing.
  • Timing from start to finish is approximately 30-60 days.
  • No finance fees or application fees required.

Loan Sizing and Conditions

  • The new loan amount equal to the existing mortgage unpaid principal balance (ie. no additional debt added).
  • The new loan maturity will remain unchanged from existing mortgage.
  • 1.05x DSCR required.
  • The mortgage insurance premium remains unchanged from original FHA-insured loan.

Prepayment and Assumptions

  • The IRR resets the prepayment penalty structure to 10 years (ie. 10%/9%/8%/7%….)
  • Alternative prepayment structures may be available based on current market conditions.
  • All other HUD requirements from existing regulatory agreement remain in effect.
Berkadia FHA/HUD 223(f) Green MIP Program

Download Program Details | Connect with Mortgage Banker

Every FHA-insured loan for a multifamily property includes a mortgage insurance premium (MIP). MIPs, which fund HUD’s mortgage insurance programs, are paid by the borrower at closing and then monthly, in addition to principal and interest. Lower Green MIP rates are offered for properties that meet HUD green standards and reporting requirements. If eligible on 223(f) transactions, upfront MIPs are reduced from 1.00% to 0.25% at closing and monthly MIPs are reduced from 0.60% to 0.25% for the life of the loan.

For all properties, regardless of age or occupancy, owners must obtain a HUD-approved green building certification.

  • Enterprise, Earthcraft, Greenpoint, LEED or National Green Building Standard are accepted.

For properties less than three years old with LESS than 80% occupancy over the past 12 consecutive months, owners must obtain a Statement of Energy Design Intent (“SEDI”) score above 90.

  • A third-party consultant submits energy/water system specifications into the EPA’s Portfolio Manager scoring program to analyze projected consumption.

For properties less than three years old with MORE than 80% occupancy over the past 12 consecutive months, owners must obtain a Statement of Energy Performance (“SEP”) score of 90 or above.

  • A third-party consultant submits 100% of the property’s energy/ water consumption data over the past 12 months to the EPA’s Portfolio Manager scoring program.

For properties more than three years old, owners must obtain a Statement of Energy Performance (“SEP”) score of 75 or better.

  • A third-party consultant submits 100% of the property’s energy/ water consumption data over the past 12 months to the EPA’s Portfolio Manager scoring program.
  • If a property is not expected to score above 75, an ASHRAE Energy Audit from a third-party environmental consultant will be required in order to determine what energy upgrades/improvements will produce a SEP score above 75.

FREQUENTLY ASKED QUESTIONS

Are there additional requirements for borrowers to be eligible for a Green MIP?

All owners, regardless of property age, are required to submit a Data Collection Plan that will collect all energy/water consumption for 100% of the property. Each year, a SEP score of 75 or better must be reported to HUD.

What are the costs associated with becoming eligible for a Green MIP?

The costs to qualify for a Green MIP, including the cost of improvements that may be needed to increase the SEP score or to meet the minimum certification requirements, will vary.

  • Feasibility study/preliminary evaluation for green certification: $5,000
  • Statement of Energy Performance (“SEP”), if aggregate data is provided: $2,000
  • Green certification from a qualified vendor: $25,000-$35,000
  • Environmental consultation, including collection and scoring of utility usage and the analysis of projected upgrades: $15,000-$17,000 (only for properties that need performance upgrades)
  • ASHRAE Level II Energy Audit: $8,000-$10,000 (only for properties that need performance upgrades)

Does qualifying for a Green MIP add significant time to the HUD loan application process?

A HUD refinance/acquisition loan application typically takes
two to three months to complete. Green certification feasibility analysis, testing and design should begin at least one month prior to beginning a HUD application, so that green certification can be submitted alongside other HUD application materials.

How do I collect water and energy consumption data for my entire property?

The most effective way to collect water and energy consumption data for an entire property is by using master meters, or a utility that provides aggregated data for the entire property.


Build the foundation for a better tomorrow by partnering with Berkadia FHA/HUD. As a leader in the HUD sector, we have the vision and versatility to create customized debt financing and equity solutions to fit all project sizes, locations and borrower profiles.

For more information:
Please reach out to your Berkadia mortgage banking professional.

Leadership

Steve Ervin

SVP - Head of FHA and Seniors Housing Finance

David Blake

Senior Managing Director

Tim Nunan

Senior Managing Director

Kevin Kozminske

Senior Managing Director

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At Berkadia, our capital strength, market knowledge, breadth of experience and deep industry relationships ensure that we can deliver the certainty of execution that our clients depend on.

Read our Housing and Urban Development brochure today and learn more.

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Frequently Asked Questions

My property was completed less than three years ago, is it eligible for a refinance with a HUD-insured mortgage?
Yes, it is eligible for a refinance with a HUD-insured mortgage, per the 2020 MAP Guide, effective March 18, 2021.
What are my options for supplemental loan proceeds during the term of the loan?
FHA/HUD-insured programs do not offer supplemental loan programs like those offered by GSEs. However, there are a few options available to borrowers with HUD-insured loans: (1) a borrower with an existing HUD-insured loan may access HUD’s abbreviated refinance program, Section 223(a)(7). The main purpose of this program is to lower the interest rate on the existing loan and/or completed desired repairs to the property. (2) A borrower may pursue a note modification in an advantageous interest rate environment and lower the interest rate on the HUD-insured first mortgage if all other terms are kept the same. (3) A borrower may obtain a supplemental loan (pursuant to Section 241a) to fund major capital improvements or additions to an existing property.
What types of secondary financing (i.e. mezzanine debt) are allowed under the program?
Secondary financing is permitted under HUD’s programs but it is highly restrictive. Any subordinate debt must comply with certain requirements, most notably, the term of the note must at least be equal to the term of the HUD loan (35 or 40 years) and repayment is restricted to surplus cash (cash flow) only. HUD will allow a preferred equity arrangement if there are no prescribed cash flow payments and any changes to key principals cannot occur without HUD approval.
What are the net worth and liquidity requirements of the key principals?
For insured loans less than $75 million, HUD does not have any specific financial requirements for a sponsor’s key principals and the recommendation is based on the judgement of the lender and its underwriting team. For loans, greater than $75 million, a sponsor’s key principals must have, in aggregate, a net worth equal to at least 20% of the loan amount and liquidity equal to at least 7.5% of the loan amount. This requirement may only be waived on affordable housing transactions.
My group has never had a HUD loan before. Is specific HUD experience required to be approved as a Sponsor for a HUD-insured application?
HUD experience is not a requirement to be approved as a property owner, contractor or manager requesting a HUD insured loan. HUD does, however, require the property team to have experience in developing, owning or managing similar properties to the subject.
Due to the length of the application and closing process for the Section 221(d)(4) program, what type of construction activities are permitted prior to closing?
Generally, HUD does not permit an early start to the construction process and no work may take place on a site once the application process has begun. After receipt of a firm commitment, approval for an early start may be granted by HUD under certain conditions. Some work, such as clearing, grading, minor demolition, environmental remediation or other minor preliminary work may be permissible.
What are the major differences between underwriting a HUD loan compared to an agency loan?
Generally speaking, the HUD underwriting process involves a higher degree of paperwork to complete the application. There are numerous HUD forms and certifications which are required for the borrower/sponsor, key principals, management agents, general contractors, etc. The overall scope of due diligence is similar to a GSE loan application. HUD’s guidelines and underwriting practices are more focused on risks associated with, environmental and fair housing/accessibility issues.
The maximum leverage allowed on the Section 221(d)(4) construction program sounds great, what am I missing?
The Section 221(d)(4) program is considered a cost-based program with a maximum loan to cost of 85-90%. HUD underwriting guidelines only allow for a finite list of costs and exclude some costs that conventional developers may be used to including in their development budgets. The most common costs include: developers fee, contingency, lease-up reserve, marketing expenses, demolition and off-site improvements, but some of these items are considered in the HUD-required reserves which can be posted in either cash or letter of credit. While the program outlines a maximum loan to cost of 85%, it also allows for BSPRA, which can result in cash out when there is land equity.
What are the main requirements of ownership and management during the life of the loan?

An owner must provide annual audited financial statements to HUD for review within 90 days of the property’s fiscal year-end. This audit should contain a calculation of surplus cash (cash flow), which is the basis of cash distribution to ownership. Distributions can only be made upon audit review and approval twice per fiscal year. An owner must also comply with annual REAC (physical) property inspections. REAC scores are on a scale of 0 – 100, with below 60 considered to be failing. High scoring properties can obtain waivers of future inspections for a period of one or two years depending on the score.

A replacement reserve account is required to be maintained during the life of the loan. The replacement reserve account is structured according to a replacement schedule of the property’s capital items and withdrawals are typically made consistent with this model. HUD loan documents also require a PCNA Report every ten (10) years to measure the adequacy of the property’s replacement reserve account. If a property has qualified as Green/Energy Efficient and received a reduced MIP, HUD will require annual energy testing and compliance with a minimum Energy Star score of 75.

What is BSPRA?
BSPRA stands for Builders/Sponsors Profit Risk Allowance. It is an option under the Section 221(d)(4) program which requires: (1) an established identity of interest between the borrower and general contractor and (2) the general contractor’s profit to be satisfied outside of loan proceeds. In exchange for this structure, the recognized costs in a development (not including land) are artificially increased by 10%. The 85% loan to cost calculation is then made on the higher cost figure. This results in a higher insured loan amount (roughly 93% of recognized cost) provided minimum debt service coverage and statutory mortgage limits support the underwriting. BSPRA is not available on Section 241(a) and requires a cost-plus construction contract.
What are the limitations on commercial space within a mixed-use development?
Commercial space limitations vary, depending on the mortgage insurance program. Under Section 221(d)(4), the maximum allowable commercial space is 25% of total rentable project area and the maximum underwritten commercial income is 15% of project income. Also, as part of the Section 221(d)(4) program, commercial occupancy is limited to 80%, regardless of the market occupancy. In the determination of total development cost, HUD will recognize the cost of completing white box commercial space only. Any tenant specific improvements are a cash requirement of the sponsor. Under Section 223(f), commercial space is limited to 25% of total net rentable space, and the maximum underwritten commercial income is 20% of project income. Section 223(f) permits a maximum 90% occupancy factor on commercial income.

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