FHA SECTION 221(d)(4) – Multifamily Accelerated Processing (MAP)
Loans to construct or substantially rehabilitate affordable and market rate multifamily rental housing
Affordable Housing
- Affordable housing is defined as projects meeting either the minimum affordability requirement for Low Income Housing Tax Credits (LIHTC) or the requirements for project-based Section 8.
- To qualify under the LIHTC affordability requirement, rent and income restrictions must be imposed, monitored and enforced by a governmental agency for at least 15 years after Final Endorsement by means of a recorded Regulatory Agreement requiring the project to meet either of the LIHTC restrictions, including income averaging as applicable: 20% of units at 50% of area median income (AMI); or 40% of units at 60% of AMI.
- Projects need not use LIHTCs to qualify for affordable underwriting so long as they meet the requirements for LIHTC affordability.
- To qualify as affordable based on project-based Section 8, (Broadly Affordable) the project must have a Housing Assistance Payment contract covering 90% of the units with a minimum remaining term of 15 years.
Middle Income ("Workforce") Housing
- Projects must have 50% of their units restricted to households earning up to 120% of area median income (AMI).
- Project must contain a use restriction and must be monitored by a state or local government entity annually. A minimum use restriction period of 10 years is required to ensure that middle income tenants benefit from this policy.
- However, because individual state and local programs vary widely, HUD has waiver authority to approve a term of less than 10 years when enhanced benefits to middle income tenants exist (ex. the proposed use restriction is less than 10 years, but targeted units exceed the 50% minimum.) In no case, however, should the restriction agreement be less than 5 years.
Program Features
- Combines construction and permanent financing approval in a single transaction.
- Loan is pre-payable, assumable and non-recourse; maximum 40-year term with full amortization.
- The cost of rehabilitation must exceed the greater of a) 15% of the project’s replacement cost or b) $19,948 [1]per unit, adjusted by a high-cost factor; or c) involve the replacement of at least 2 major building components. Projects whose rehabilitation costs fall below these levels may qualify under Section 223(f).
- Construction and rehabilitation costs are subject to Davis-Bacon wage determinations.
- For for-profit owners, a Builder’s and Sponsor’s Profit and Risk Allowance (BSPRA) of 10% of the development costs may be capitalized in the loan and applied towards the cash equity requirement at closing when there is an Identity of Interest between the mortgagor and contractor.
- In lieu of BSPRA, non-profit owners qualify for a Developer Fee of 8% of Mortgage Amount, but not less than $40k or more than $400k. (Market-Rate deals only)
- Construction contingency requirements for all substantial rehabilitation projects must be 10-15% of construction cost.
- Loan-to-cost (LTC) and debt service coverage (DSC) requirements are based on project type and loan size.
[1] Based on 2025 High-Cost Percentage Mortgagee Letter
Loans > $130 Million
Project Type | Loan to Cost (LTC) | Debt Service Coverage (DSC) |
Affordable | 87.00% | 1.15 X |
Market Rate | 85.00% | 1.15 X |
Broadly Affordable and Middle Market | 90% | 1.11 X |
fees AND INSURANCE PREMIUMS
0.30% | Application Fee to HUD (.15% at Pre-application that is non-refundable and .15% at the Firm Commitment stage |
0.65% | Upfront Mortgage Insurance Premium (MIP) - .25% or .35% for tax credit/affordable deals. |
0.50% | Inspection Fee |
2.00% | Maximum Financing (Origination) Fee |
1.50% | Maximum Placement Fee |
2.00% | Costs of Issuance for Tax-Exempt Bond Transactions |
An annual .65% Mortgage Insurance Premium (MIP) – .25% or .35% for tax credit/affordable deals is paid to HUD.
Escrows
- Full escrows required for property insurance, real estate taxes, and HUD mortgage insurance premium.
- Replacement reserve escrow for on-going replacement of depreciable items is required for the term of the loan. The amount of the annual deposit will be revised after 10 years based on a new capital needs assessment.
- An Operating Deficit Escrow will be required. This escrow must be funded by the borrower at closing with cash or a letter of credit. For market rate and affordable new construction projects, and rehabilitation projects involving a substantial amount of resident displacement, the minimum escrow is:
Loan Amount | Minimum Operating Deficit Escrow |
$25M – $75M | Greater of 3% of loan or 4-6 months debt service and MIP |
>$75 M | 12 months debt service and MIP |
>$100 M | 12+ months debt service and MIP |
- Market rate new construction projects require a Working Capital Escrow equal to 4% of the mortgage is required at closing. This deposit must be funded by the borrower with cash or a letter of credit. Half of this escrow (2% of the mortgage amount) will be dedicated to cover change orders during construction and the other 2% for excess soft costs. Market rate and affordable substantial rehabilitation projects require a 2% Working Capital Escrow – the contingency allowance covers change orders.