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HUD Increases Threshold for Large Multifamily Loans

Facilitates Greater Flexibility, Proceeds and Speed for FHA Transactions $75 million to $120 million in Size

HUD's Office of Multifamily Production has increased the threshold for what it considers a Large Multifamily Loan from $75 million to $120 million. This change marks the first increase since 2014 and reflects the rise in property values and construction costs that have occurred over the past decade. 

As Large Multifamily Loans have more stringent debt-service coverage ratios (DSCRs), loan-to-values (LTVs) and reserve requirements, the higher threshold will allow more transactions to use the standard FHA/HUD underwriting process and criteria. This means that loans between $75 million and $120 million will be able to realize more proceeds and close faster.

"Historically, lenders could underwrite loans up to $75 million without facing additional scrutiny – any multifamily loans exceeding that amount required special approval that could add approximately four weeks to the process," said Erik Lindenauer, President of FHA at NewPoint Real Estate Capital. "With the welcomed increase in large loan limits, the workload for our colleagues at HUD will be reduced, leading to the quicker completion of more deals. The ultimate result is a faster loan process and more liquidity in the housing market, allowing borrowers to better tackle the housing supply shortage."

The revision also provides a new method to review the Large Multifamily Loan threshold annually with the possibility of increasing it in $5 million increments. Similar inflation-adjusted items in the MAP Guide will also be reviewed annually. 

FHA Multifamily programs offer several key benefits for borrowers, including longer terms and amortization, low DSCRs, higher leverage and lower rates.

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