FHA SECTION 221(d)(4) – Multifamily Accelerated Processing (MAP)

Loans to construct or substantially rehabilitate affordable and market rate multifamily rental housing

Definitions

Affordable housing is defined as:
- Rent and income restrictions must be imposed, monitored and enforced by a governmental agency for at least 15 years after Final Endorsement, and
- Either
  - a recorded Regulatory Agreement requiring the project to meet at least the minimum LIHTC restrictions of 20% of units at 50% of area median income (AMI), or 40% of units at 60% of AMI, with economic rents (i.e. the portion paid by the residents) on those units no greater than LIHTC rents, or
  - a Project-Based Section 8 contract for 90% of the units.

Projects need not use LIHTCs to qualify for affordable underwriting so long as they meet the above requirements.

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) $15,000 per unit adjusted by a high cost percentage based on geographic location; or, c) involve the replacement of at least 2 major building components. Projects whose costs fall below these levels may qualify under Section 223(f).
Construction and rehabilitation costs are subject to Davis-Bacon wage requirements.
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.

Loans < $120 Million

Loans > $120 Million

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 (.25% or .35% for tax credit/affordable deals and .25% for “green” market rate 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 (.25% or .35% for tax credit/affordable deals and .25% for “green” market rate deals) is paid to HUD.

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 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
<$25	4-6 months debt service
$25M – $75M	9 months debt service
>$75 M	12 months debt service
>$100 M	12+ months debt service

Market rate new construction projects require a Working Capital Escrow equal to 4% of the mortgage 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) will be dedicated to cover change orders during construction. Market rate and affordable substantial rehabilitation projects require a 2% Working Capital Escrow – the contingency allowance covers change orders.