HUD Announces Affordable Housing Initiatives
HUD recently announced a series of initiatives to support affordable housing production. According to HUD, financing affordable and LIHTC housing is a top priority for multifamily housing. And the changes announced in a recent memo by Benjamin Metcalf, Deputy Assistant Secretary for Multifamily Housing Programs, reflect efforts by HUD to better align HUD programs with the low-income housing tax credit sites. HUD hopes to align FHA’s underwriting process with the unique timing constraints of LIHTC projects, to increase FHA’s affordable housing production and preservation, and to test the Single Underwriter operating model. The initiatives stem from an FHA low-income housing tax credit pilot program launched in 2011.
These initiatives will be reflected in a revised Multifamily Accelerated Processing, or MAP, Guide. The organizational changes include three major areas:
- Single Underwriter Model. The single underwriter model tested in the LIHTC pilot is being rolled out nationwide as part of HUD’s Multifamily for Tomorrow initiative with specialists in each HUD region focused on tax credit transactions;
- Dedicated Rental Assistance Demonstration (RAD) Teams. There will be dedicated teams of FHA/RAD underwriters in four hubs and regional centers around the country. The new teams are trained to meet the unique timelines and complexities of RAD and LIHTC.
- Expansion of Pilot to 221(d)(4). HUD is currently testing expansion of the pilot program to include FHA Section 221(d)(4) mortgage insurance. The current pilot applies to FHA Section 223(f) mortgage insurance, which does not include new construction or substantial rehabilitation. Section 221(d)(4) insurance includes both.
In addition to the organizational changes, the HUD memo also clarified six existing policies:
- HUD will underwrite a fixed minimum pay-in schedule for all low-income housing tax credit transactions;
- Bridge loans can be included in low-income housing tax credit equity paid;
- The FHA increased the number of transactions in which the MAP lender holds up to 100 percent ownership in the low-income housing tax credit limited partner from five to 10 transactions;
- HUD says that subordinate debt on low-income housing tax credit transactions, including seller financing, may represent up to 100 percent of total development costs;
- HUD revised its minimum underwritten vacancy and collection loss rates to distinguish between different classes of multifamily housing; and
- FHA will now underwrite development fees up to 15 percent of the total development costs that comply with regulations for the low-income housing tax credit program.