223(f)/202 – Refinance or Purchase of Section 202/811 Direct Loans

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ELIGIBLE PROPERTIES:
Section 202/811 developments that currently have a direct loan from FHA. Minor to moderate rehabilitation is permitted.

PROGRAM REQUIREMENTS AND BENEFITS:
Project Owner must agree to operate the property under terms at least as advantageous to the residents as those required by the original Section 202/811 loan agreements.
In most cases, prepayment of the Section 202/811 loan must be approved by FHA.
Savings resulting from reduced interest rate may be used for:
a) increasing supportive services by up to 15%,
b) rehabilitation of common areas or individual units,
c) construction of an addition or other facility in the project, or
d) rent reduction of unassisted tenants residing in the project.

MAXIMUM LOAN:
The lesser of the following criteria:
90% of FHA appraised value, using a capitalization rate based on the band of investment rate analysis;
90% of Net Income, using the Section 8 contract rents for the income analysis;
Statutory unit mortgage limits.
Refinance Transaction:
The cost to refinance.
Purchase Transaction:
90% of the cost of acquisition.
Note: No equity take out is permitted for either refinance or purchase transactions.

INTEREST RATES:
Fixed rate determined by market rates at the time of rate lock.

AMORTIZATION:
Up to 35-year, fully amortizing loan.

PERSONAL RECOURSE:
Non-recourse.

ASSUMABILITY:
Assumable, subject to Walker Dunlop and FHA approval.

SUBORDINATE FINANCING:
Allowable, subject to FHA criteria.

PREPAYMENT:
Negotiable.

REPAIRS:
Repair program may not exceed the greater of 15% of the value after repairs, or $6,500 plus applicable high cost percentage per unit.
No more than one major building system can be replaced.

WAGE REQUIREMENTS:
Davis-Bacon prevailing wage laws do not apply.

ANNUAL MORTGAGE INSURANCE PREMIUMS:
1.0% of the mortgage amount is payable at closing. Thereafter, the MIP is escrowed monthly based on a rate established by HUD. The rate is fixed at loan endorsement.

ESCROWS:
Monthly escrows for property insurance, real estate taxes, reserves for replacement (as determined by FHA) and mortgage insurance premiums. An initial deposit to replacement reserve and 100% of repair costs (both as determined by FHA) are escrowed from mortgage proceeds.

COMMERCIAL SPACE:
Commercial area shall not exceed 20% of the total net rentable area of the project and commercial income shall not exceed 20% of effective gross income.

ENVIRONMENTAL ISSUES:
Special rules apply for properties which are located in Flood Hazard Zones as designated by FEMA.

APPLICATION FEE:
A non-refundable fee of 0.3% of the requested mortgage amount is payable to FHA at the time of application, plus estimated underwriting costs for market study, appraisal, architectural/engineering report, cost analysis, environmental assessment and other loan processing costs.

FINANCING AND PLACEMENT FEES:
Negotiable.

CLOSING EXPENSES:
Standard transaction costs, including legal fees, title insurance and survey.

DEVELOPER’S FEE:
A maximum developer’s fee of 15% of acceptable development cost is permitted.

OTHER FHA REQUIREMENTS:
Cash escrows or letters of credit are required for the following:
20% of repair costs as a completion guarantee.
2.5% of repair costs as a latent defects guarantee, due at completion of repairs.
Forecasted operating deficits, (maximum of 18 months) to be released upon achievement of breakeven operations for 90 days.

FHA PROCESSING TIME:
One stage for FHA Multifamily Accelerated Processing (MAP) Procedures:
Firm Commitment Stage: 60 days for review.

PRELIMINARY SUBMISSION PACKAGE:
Include the following in your request for a loan quote:

  • Property description and location map.
  • Last approved rent schedule.
  • Current rent roll and year-to-date operating statement.
  • Operating history (FHA Audits) – prior 3 years, if available.
  • Current year operating budget.
  • Existing debt or purchase price.
  • Current HAP Contract.
  • Existing Regulatory Agreement.
  • Current Mortgage Note.
  • Current REAC Report.

This is a summary of general program terms, which are subject to change. This is not a commitment to lend.