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As a commercial real estate lender, I can tell you that there are a number of financing options for your commercial real estate property. One of the most attractive financing options is HUD FHA Mortgage Insurance. HUD FHA mortgage insurance is an insurance program that facilitates the new construction, substantial rehabilitation, purchase, or acquisition of multi-family rental housing. In addition, HUD will insure eligible senior housing property types including board-and-care homes, assisted living facilities, skilled nursing facilities, and even post-acute care rehabilitation centers.
Under a separate program, HUD will insure the construction or refinance of acute care hospitals. The programs are administrated through the U.S. Department of Housing and Urban Development, with regional and local offices located through the country. The programs are designed to provide the multi-family and senior housing owner with attractive pricing and terms not found in the conventional marketplace and to protect the lender if a borrower defaults on the insured loan.
The Federal Guarantee results in an AAA rating on financing, which is eligible for securitization by Ginnie Mae and provides credit enhancement for tax exempt bonds and Low Income Housing Tax Credits (LIHTCs).
There are a number of programs available for owners of multi-family and senior housing. Here are some of the key highlights:
- Fixed interest rates (currently below 6.0 percent)
- No balloons or repricing points
- No personal liability or guarantees
- Assumable with consent from HUD
- Loan terms up to 40 years
- Low debt service coverage ratios (1.11x)
- Loan to value ratios as high as 95 percent
In many cases, the HUD-insured mortgages can cover 100 percent of refinance or acquisition transaction costs. New construction programs offer 40-year terms, 90 percent LTV (95 percent for non-profit sponsors), and 90 percent debt service coverage (95 percent for non-profit sponsors). Eligible mortgagors include owners or prospective purchasers (profit-motivated or non-profit) of eligible multi-family and senior housing.
In recent years, HUD has instituted an accelerated underwriting and review program called MAP (Multifamily Accelerated Processing) which has vastly improved turnaround and processing times. MAP has standardized HUD’s underwriting process by applying national standards resulting in a process that creates more timely and consistent results. Since 2000, HUD has insured 2,794 projects involving 385,856 beds/units and $21,089,090,861 in loan volume.
If you are considering financing options for your multi-family or senior housing property, HUD-insured financing should be on your list.
Joshua S. Hausfeld is an underwriter with Love Funding Corporation in Washington, D.C.---one of the first MAP-approved lenders and consistently ranked among the top FHA lenders in the country. Contact him at 202-887-8475 or e-mail Jhausfeld@lovefunding.com
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