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HUD/FHA

HUD/FHA 221(d)(4) + 220

New Construction or Substantial Rehabilitation of Multifamily Properties
PURPOSE

New construction or substantial rehabilitation of Market Rate or Affordable Multifamily Housing Properties.

SUBSTANTIAL REHABILITATION

Qualifies as substantial rehabilitation if the cost of repairs, replacements and improvements exceeds $19,293 per unit adjusted by HUD’s high-cost factor.

COMMERCIAL SPACE

Eligible for up to 25% of net rentable area and 15% of EGI for 221(d)(4). Eligible for up to 25% of net rentable area and 30% of EGI for 220.

BORROWER

Single asset, special purpose entity. Either for-profit or nonprofit.

MAXIMUM LOAN AMOUNT

The lesser of:

  • for Market Rate properties, applicable factors: 85% LTC, 1.176 DSCR;
  • for Affordable properties, applicable factors: 87% LTC, 1.15 DSCR; and
  • for properties with 90% or greater rental assistance, applicable factors: 90% LTC, 1.11 DSCR.

* Other parameters apply to mortgages over $125 million.
** Other than the above constraints, there are no minimum or maximum loan sizes.

TERM & AMORTIZATION

Interest only during the construction period, plus 40 years fully amortizing.

INTEREST RATE

Fixed-rate, subject to market conditions at the time of rate lock.

MORTGAGE INSURANCE PREMIUM

Based upon the following:

  • 0.65% for 221(d)(4);
  • 0.70% for 220;
  • 0.25% - 0.35% for affordable and subsidized properties; and
  • 0.25% for Green Certified properties.
RECOURSE

Non-recourse during both construction and permanent phases of financing.

ASSUMABILITY

Fully assumable, subject to HUD approval.

PREPAYMENT

Negotiable. Best rates typically have a 1–2-year lockout with a declining prepayment penalty for the remainder of the first 10 years.

THIRD PARTY REPORTS

Market Study, Appraisal, Architectural and Costs Review and Phase I ESA. Other reports as needed.

ESCROWS

Escrows for debt service, mortgage insurance premium, taxes, insurance, replacement reserves, and working capital and operating deficits are required.

FEDERAL LABOR STANDARDS

Davis-Bacon prevailing wages and reporting requirements.

ASSURANCE OF COMPLETION

Payment and performance bond or cash deposit/letter of credit.

HUD APPLICATION FEE

$3 per $1,000 of requested loan amount (1/2 due at pre-application).

HUD INSPECTION FEE

$5 per $1,000 of requested loan amount for new construction.
$5 per $1,000 of improvement costs for substantial rehabilitation.

 

This sheet sets out the general guidelines of a loan program and is designed solely as an aid to prospective borrowers and other clients. It does not represent or imply a contract or a commitment to lend funds. A commitment to lend funds may only be made by a written letter issued by NewPoint to a prospective borrower. This term sheet is subject to change at any time without notice at the sole discretion of NewPoint Real Estate Capital LLC.