WASHINGTON, DC-The US Department of Housing and Urban Development Agency has streamlined and revised rules to make it easier for low income housing multifamily developers to get mortgage insurance through the FHA. The changes are significant enough to increase the price of low income housing tax credits by 5 cents, Cheryl Malloy, senior vice president of multifamily and governance with the Mortgage Bankers Association, tells GlobeSt.com.
“This is a huge accomplishment for HUD that will directly impact low income housing tenants,” she says. “A number of low income housing projects that wouldn’t ordinarily get done, will now get done because these changes.”
One main change in HUD Mortgage Letter 2008-19 reduces to 20% of the tax credit equity from 100% that must be funded at the time of HUD’s initial endorsement. The remainder now can be paid in over the development period–as is the case for most conventional financing. What this means is that developers will be able to bring in equity to the project throughout the construction phase, Malloy says. Another change permits the deferred submission of full plans and specifications.
Other changes permit firm commitments to be conditioned, under certain defined circumstances, upon HUD approval–thus providing more flexibility to transactions and giving borrowers’ a better chance of getting favorable rate locks and equity pricing. The Mortgagee Letter also calls for the designation of a LIHTC Coordinator in each Multifamily Hub and Program Center to work with credit allocation agencies and developers. The changes went into affect immediately