FHA Expands Pilot Program to Accelerate LIHTC Project Financing
HUD Secretary Ben Carson recently announced a significant expansion of a Federal Housing Administration (FHA) pilot program that streamlines FHA mortgage insurance applications for affordable housing developments that have equity from the sale of Low-Income Housing Tax Credits (LIHTCs).
In 2012, FHA launched a pilot program to streamline FHA mortgage insurance applications for projects with equity from the sale of LIHTCs, specifically applications to refinance mortgage debt under FHA's Section 223(f) program. Today, FHA is expanding this pilot program to include new construction and substantial rehabilitation under its Section 221(d)(4) and Section 220 programs.
FHA's expanded pilot program will ensure faster and more efficient processing for low-risk, LIHTC transactions by eliminating redundant reviews. Average processing time for LIHTC deals is currently 90 days. Under FHA's pilot, processing times are reduced to 30 days under the Expedited Approval Process track and 60 days under the Standard Approval Process track. A shorter application review period allows borrowers to lock in better interest rates sooner, an important capability in a rising interest rate environment.
The new expanded pilot will also encourage long-term investments in low-income urban and rural communities and supports development in Opportunity Zones. Opportunity Zones are census tracts in low-income communities experiencing economic distress. In July 2018, the Internal Revenue Service published a list of more than 8,700 qualified opportunity zones in the 50 states and U.S. territories. You can find the list here.