223F Loans can be very time consuming, but many multifamily owners have found them to be very attractive over the past year, as financing options have been limited.  The process of procuring a 223F loans can take from 6 to 9 months to close, but during the credit crunch it has been a very active means to secure good financing with decent terms.

However it appears that the FHA is in the process of tightening the reins on this particular type of lending. Take a look over here for additional information.

Some of the key points in the article:

The 221(d)(4) program has always offered some of the most generous terms in the industry, terms that have never changed throughout the programs history. The loan’s 1.11x DSCR is a key feature of the program.

But 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.

And that’s not all. Another proposed change 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 fund, but that figure will be 4 percent under the proposed rules. That’s a big change: On a $10 million dollar loan, a developer will have to come up with another $200,000. Another proposed change involves increasing the program’s required operating deficit reserves, from three months of debt service to four months.

More modest changes were proposed to the FHA’s Sec. 223(f) program for refinancings or acquisitions. That program, which has also been a key source of liquidity for the multifamily industry, will see a tougher DSCR requirement as well. 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.

Make sure you check out the original article on HousingFinancing.com. We’d love to hear your comments about this, or anything else related to multifamily property management!

This entry was posted on Thursday, February 18th, 2010 at 3:03 pm and is filed under Uncategorized. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.