Section 213 insures mortgage loans to facilitate the construction,
substantial rehabilitation, and purchase of cooperative housing
projects. Each member shares in the ownership of the whole project
with the exclusive right to occupy a specific unit and to participate
in project operations through the purchase of stock.
Section 213 insures lenders against loss on mortgage defaults. Section
213 enables nonprofit cooperative housing corporations or trusts
to develop or sponsor the development of housing projects to be
operated as cooperatives. Section 213 also allows investors to provide
good quality multifamily housing to be sold to non-profit corporations
or trusts upon completion of construction or rehabilitation. Alternatively,
cooperatives may use Section 221(d)(3) to insure construction or
substantial rehabilitation of cooperative projects.
Type of Assistance:
FHA mortgage insurance for HUD-approved lenders.
Insured mortgages may be used to finance construction, acquisition
of existing or rehabilitated detached, semidetached, row, walk-up,
or elevator type housing projects consisting of five or more units.
The program has statutory per unit mortgage limits which may vary
according to the size of the unit, the type of structure, and the
location of the project. There are also loan-to-replacement cost
limitations. Contractors for new construction and substantial rehabilitation
housing projects must comply with prevailing wage requirements under
the Davis-Bacon Act.
Non-profit cooperative ownership housing corporations or trusts
are eligible to use
Section 213. They may either sponsor projects directly, sell individual
cooperative members, or purchase projects from investor-sponsors.
HUD imposes no restrictions on the income or characteristics of
shareholders/residents in an insured cooperative.
The sponsor has a pre-application conference with the local HUD
Multifamily Hub or Program Center to provide general application
guidance and to determine the feasibility of the project. The sponsor
must then submit a site appraisal and market analysis (SAMA) application
(for new construction projects) or feasibility application (for
substantial rehabilitation projects), arranges for an environmental
assessment, and check with the State to determine its requirements.
Following HUD's issuance of a SAMA or feasibility letter, the sponsor
submits a firm commitment application through a HUD-approved lender
for processing. Considerations include, market need, zoning, architectural
merits, capabilities of the borrower, and availability of community
resources. If the project meets program requirements, the local
HUD Multifamily Hub or Program Center issues a commitment to the
lender for mortgage insurance.
This program is authorized by Section 213 of the National Housing
(12 U.S.C. 1715e). Program regulations are found in 24 CFR 213.
The basic program instructions are in HUD Handbook 4550.1 - Basic
Cooperative Housing Insurance available on HUDclips.
The program is administered by the Office of Multifamily Housing
In fiscal year 2012, the Department insured mortgages for 5 projects
with 247 units, totaling $28 million.