HUD recently published a memo clarifying and revising some policies in its Section 223f pilot program designed to provide FHA mortgage insurance for Low-Income Housing Tax Credit (LIHTC) properties. The changes are intended to streamline the process for borrowers and implement some common-sense policies. For example, HUD will now permit total debt on a property to exceed the normal 92.5% loan-to-value cap, provided certain program requirements are satisfied. This will be particularly helpful in the acquisition and rehabilitation of existing affordable housing projects in HUD’s portfolio. In addition, HUD has recognized that in some LIHTC transactions, it makes sense to provide for the gradual pay-in of equity, rather than require all rehab funds to be escrowed up front. With these changes, which are effective immediately, the intent is to make the FHA pilot program even more competitive and attractive to borrowers looking for a source of financing for their LIHTC projects. For more information, see the full HUD memo here or contact Robert C. Mills or any of the other attorneys at Goldfarb & Lipman. (Please refer to “FHA Pilot Program for LIHTC Properties” in the subject line.)
