HUD Announces Changes to DSCR and LTC/LTV Requirements
HUD announced changes to the underwriting requirements of their primary multifamily mortgage insurance programs, ultimately providing lenders and borrowers with higher leverage in financing multifamily housing, including market rate and affordable developments as well as middle income developments.
The first change lowers the Debt Service Coverage Ratio (DSCR) requirements and increases Loan-to-Cost (LTC) and Loan-to-Value (LTV) restrictions, a notable shift that will increase loan proceeds for sponsors.
The second creates a Middle Income program under the 221(d)(4) loan program, with lower DSCR requirements and higher LTC restrictions. Middle income properties are defined as those with a use restriction, monitored by a state or local government entity, on 50% of the units restricted at 60% to 120% AMI.
Key Proposed Changes
Market-Rate 221(d)(4) and 223(f) transactions:
- Reduced DSCR from 1.176x to 1.15x
- Increased LTC/LTV from 85% to 87%
Affordable 221(d)(4) and 223(f) transactions:
- Reduced DSCR from 1.15x to 1.11x
- Increased LTC/LTV from 87% to 90%
Middle Income Housing 221(d)(4) transactions:
- Reduced DSCR from 1.176x to 1.11x
- Increased LTC from 85% to 90%
These changes are effective immediately for FHA loans that have not reached initial
endorsement.
Connect with a NewPoint FHA expert to learn more and find out how to get the most
leverage on your next investment.
Read the HUD press release here.