FHA 221(d) Apartment Loan to Cost Changes

Shaun Donovan: FHA D4 Changes are Necessary

By Jerry Ascierto
Multifamily Executive

The only game in town for construction debt is tightening its underwriting of market-rate deals. And while borrowers aren’t happy about it, the U.S. Department of Housing and Urban Development (HUD) says it’s a matter of survival. The Federal Housing Administration (FHA) has proposed changes to its popular Sec. 221 (d)(4) program, raising the debt service coverage ratio (DSCR) to 1.20x for market-rate deals, and lowering the maximum loan-to-cost (LTC) ratio to about 83 percent.

HUD Secretary Shaun Donovan, who noted the “substantial vacancy rates” affecting the multifamily market, said the changes will be necessary to ensure the long-term viability of the program. “Broadly, this is ensuring that the FHA, in the long run, can be a consistent partner, and that we are strengthening the FHA’s balance sheet,” Donovan says. “We felt it was important from a risk management point of view to ensure that we are protecting the FHA fund and developing housing that is sustainable in the long-term.

” When the proposed changes were announced in early February, HUD representatives said the agency was concerned about the weaknesses in its existing portfolio of 221(d)(4) loans, and expected to rack up hundreds of millions of dollars in losses this year through that program alone. Another proposed change to the (d)(4) program would increase the minimum required amount of working capital funds. In the past, developers had to put up 2 percent of the total loan amount in a working capital escrow fund, but that figure will double to 4 percent under the proposed rules. The new rules would also increase the program’s required operating deficit reserves, from three months of debt service to four months.

Notably, the proposed changes don’t affect affordable housing deals much. Projects with subsidy levels of 95 percent or greater will still enjoy a 1.11x DSCR and 90 percent LTC, but low-income housing tax credit (LIHTC) deals would be bumped up to a minimum 1.15x and 87 percent LTC. The changes reflect HUD’s public mission to support affordable housing, and not the luxury high-rises that have increasingly sought FHA funds.

For FHA 223(f), FHA 221(d)(4). FNMA and Freddie Mac Loans go to:

www.fhaapartmentlender.com

For Full Article Click Here

FHA 223(f) Apartment Loans and Rate Premiums

FHA noticed several lenders charging rates well above par and earning up to 5 points in "Rate Premium" and may outlaw the practice of excessive interest rates and rate premium since its makes the loans more likely to default.

All lenders must now disclose "Rate Premiums" this is another case of a few lenders taking advantage of their clients.


On most refinance deals the GNMA rates have been in the 4% to 5% range plus MIP, for the last nine minths. Some lenders have processed the loan at higher rate and not ask for a quick rate reprocessing from FHA, instead using "a higher than the current marker underwriting rate" and then closed the loans with the rate set in the 6% to 7% range. This generates premiums or addtional points for the lender and the brokers involved.

Long Bonds Fall on Soft Demand for 30-Year TIPS - CNBC

Interest Rates Apartment Lender

Long Bonds Fall on Soft Demand for 30-Year TIPS - CNBC

Apartment Lender News FHA Proposed Changes to FHA 223(f) and FHA 221(d)(4) Loan Underwriting

FHA has proposed using a 1.20 DSC and other changes to FHA 223(f) and 221(d)(4) Market Rate Apartment Loans. To see complete letter click here: FHA Apartment Loan Changes

Apartment Loan Rates 30 year bonds and Greek debt

The 30 year bond sale was a bust today in the middle of the Greek Bond Crisis and the EU only verbally supporting the Greek Debt.

All this just means rates went up by 5 basis points today.

FHA 223(f) and 232/223(f) loans are now slightly over 5% plus MIP.

Apartment Lender Rates Lending Status

FHA may change underwriting to 1.20 DSC for 223(f) and and 221(d)(4).

FHA refinance rates are still below 5% plus MIP. FNMA small loan fixed 10 years no points about 6%.

Bank Lending Update:

A recent survey suggests banks are starting to lend again to commercial real estate developers and owners. Of the 60 banks surveyed at the MBA conference in Las Vegas earlier this month, 24 expect to lend $2 billion to $4 billion each in 2010 to the sector:


The recent fall in prices offers investors the opportunity to pick up quality assets at a substantial discount. 
 
Many people in the field think that commercial real estate is going through its last stage of the crisis, which Moody’s estimates shaved 44% to 55% off 2007 prices.

We are seeing activity with strong borrowers buying bank owned real estate.

FHA Apartment Lender Changes to Underwriting

FHA Bombshell: We're Tightening Our Underwriting - Debt, Lenders, Government Entities - Multifamily Executive Magazine:

"FHA wants to raise the debt service coverage ratio (DSCR) for the popular Sec. 221(d)(4) program"

"under the proposed changes, market-rate deals seeking 221(d)(4) loans would be underwritten to a minimum 1.20x DSCR. Projects with subsidy levels of 95 percent or greater will still enjoy a 1.11x DSCR, but low-income tax credit deals would be bumped up to a minimum 1.15x."

For FHA 223(f): "Tax-credit deals and HAP-contract deals will stay at the program’s current level of 1.1765x DSCR, but market-rate deals will be bumped up to 1.20x."

"The changes will be open for public comment once they are published on the Federal Register. And judging by the initial reaction of FHA lenders, there will be quite a debate between industry lobbying groups and the agency. The Mortgage Bankers Association is still studying the impact of the changes and gathering additional information on the rationale behind them, before it takes an official position."

FHA status Market Rate New Construction Deals not being approved in Downtown Chicago, several deals have been rejected in the last year. All new construction deals require a very tight apartment market to be approved.  FHA 223(f) refinance loans going very strong rates in low 5% including MIP.

For the complete article click here:  http://bit.ly/bvqoUV

For complete CREF conference letter with all proposed changes Clike Here: FHA APARTMENT LOAN UNDERWRITING CHANGES

FHA 223(F) and FHA 232/223(f) Interest Rates Apartment Loans

Rates for refinance are under 5% plus MIP with the recent ups and downs of the ten and thirty year treasury rate.

For Apartment Loans this means less than 5.45% fixed for thirty five years non recourse up to 85% of purchase price or 80% loan to value for cash out refinances.

Apartment Loan Rates Commercial Mortgages

Rates have started to move back up. See rate update below


Treasurys ease ahead of auctions - Dec. 24, 2009: http://bit.ly/8EIzbr 10 year now back up to 3.78% from 3.2% a few weeks ago.

FHA 223(f) loans can still be locked in low 5% range. FNMA and Freddie Mac rates have been higher than FHA 223(f) loan rates.

Happy Holidays and have a great New Year!

Sincerely,

Scott and Chuck Kendall

Commercial Mortgages Chicago Rate Update

Commercial Mortgage Rates moved up slightly with the ten year treasury moving up 3.57% from 2.40% over the last few days. This seems to be a result of the Chinese Bond Buying going short term rather than tens and thirties.

Apartment Refinance rates are best for 223(f) with rate locks under 5%, new construction add about 1% to 1.25%.

Enjoy the holidays!

Programs and Contacts: http://www.kendallrealtyadvisors.com/commercialmortgages.html

Commercial Mortgage Apartment Refinance Rates

Treasury Rates moved back up to 3.31% for ten year notes.

FHA 223(f) and FHA 232/223(f) Refinance Rates are still in the low 5% range.

Assisted Living News - FHA re-issues Memo for 75% loan to value for Assisted Living and this time they mean it!

For more on Commercial Mortgage Loan programs http://www.kendallrealtyadvisors.com/commercialmortgages.html

Apartment Finance Commercial Mortgage News: November 2009

Apartment lending today consists mainly of refinance loans using FHA 223(f), Fannie Mae DUS and Freddie Mac multifamily loan programs.  The main issue is that many current loans have more debt than they can refinance today, due to the SUPER SIZED LOANS of the past five years. Now with higher CAP rates and lower sales prices and more conservative financing these loans are in limbo.  Lenders and owners will continue to try to kick the can down the road unless a strong wind blows it into the ditch.

FHA 223(f) allows 80% cash out financing and up to 85% purchase and no cash out loans.  This process takes over four months to close and requires the borrower to pay for all the reports and $3 per $1000 exam fee "at risk". This is the most expensive loan process, but the FHA 223(f) provides a 35 year fixed rate loan with a rate currently in the mid 5% range including MIP, with more leverage than Fannie Mae or Freddie Mac.  As usual FHA is providing loans in many areas that other lenders are not.

The Fannie Mae and Freddie Mac loan programs can be processed more quickly and also offer low rates in the 5% range.  Currently, they are not active in cash out transactions unless the loan to value is very conservative.  On a large purchase or no cash out transactions in the 80% or lower loan to value range these are normally the best loan programs to compare against each other.

New construction financing for apartments and healthcare properties is constrained by over supply from single family and condo rentals plus apartment conversions and negative job growth in most markets. The CAP rates in most of the largest markets is above 7% due to foreclosure sales, lower than normal occupancy and rental rate that have declined. The commercial sales and mortgage volume is at a historic low as most borrowers and lenders are still adjusting to the rapid value declines.  Most owner have gone into a hold mode hoping for higher occupancy, rents and lower CAP rates.

Senior Housing Finance using FHA 232 LEAN is very actively providing refinance loans and about three new construction loans hove closed at this time using the FHA 232 LEAN.

FHA 242 New construction for hospitals is active and the new FHA 242/223(f) program may become active once some of the rules are modified.  Build America Bonds may be used for some apartment, healthcare and hospital loans, by municipal borrowers and turnkey developers. Non-Profit and For Profit borrowers are taking advantage of the programs.

Rates are near historic lows, but loans are only available at lower loan amounts than a few years ago, with the Federal Debt Clock working overtime it might be a GOOD time to lock in to a 35 year loan, in the low 5% range, non-recourse and assumable.

Commercial Mortgage FHA 223 F Apartment Loans FHA 232 LEAN Rates Status

Apartment Loan Rates for FHA 223 F loans are still in the low 5% range. This applies for FHA 223(f) Apartment Loans and FHA 232 LEAN Assisted Living, Nursing Home and other Healthcare Refinance Loans.

Most of the FHA transactions that are being approved are 223(f) apartment  loans, FHA 232 refinance loans and FHA 242 New Construction.


New Construction Rates are in the low to mid 6% range for FHA 221(d) Apartment Loans and FHA 232 LEAN Healthcare construction loans.  Several markets are currently overbuilt for apartments and other markets are overbuilt for Healthcare construction loans.

The new Build America Bond (BAB) program can be use for housing or healthcare if a municipal borrower is the owner of property.  For more on (BAB) program click this link: http://bit.ly/eFxa7

Apartment Loans $750,000 to $5,000,000

Fixed Rate non-recourse small apartment loan program.

Loan Amounts: $750,000-$5,000,000
Baltimore, Boston, Chicago, Los Angeles, New York City, San Diego,San Francisco, San Jose (CA), Sacramento, Seattle, and Washington
Fixed Rate Balloon Loans: 5, 7, 10 and 15 year loan terms with up to 30 year amortization terms

Fully Amortizing Loans: up to 30 year terms
Pricing based upon Loan to Value and Debt Service Coverage
Maximum Loan to Value: 75%
Minimum Debt Service Coverage Ratio: 1.25x
Low upfront costs, Low loan fees

http://smallapartmentloanschicago.blogspot.com/

Fannie, Freddie Pick Their Spots on Price Wars - Commercial Mortgage Information:

While Fannie Mae is seeing a lot of refinancing business, Freddie Mac seems to be winning more acquisition deals. Freddie Mac currently offers a more flexible approach to acquisitions than Fannie Mae, positioning the company to win more business as the transaction market slowly begins to pick up heading into the fourth quarter.

Apartment Refinance Commercial Mortgage Rates

Treasury rates moved lower slightly this week leaving Rates for FHA 223(f) apartment refinance loans near 5% plus MIP. Apartment Construction Loans rates are closer to 6% plus MIP