Section 207/223(f) insures mortgage loans to facilitate the purchase
or refinancing of existing multifamily rental housing. These projects
may have been financed originally with conventional or FHA insured
mortgages. Properties requiring substantial rehabilitation are not
eligible for mortgage insurance under this program. HUD permits
the completion of non-critical repairs after endorsement for mortgage
Section 223(f) insures lenders against loss on mortgage defaults.
The program allows for long- term mortgages (up to 35 years) that
can be financed with Government National Mortgage Association (GNMA)
Mortgage-Backed Securities. This eligibility for purchase in the
secondary mortgage market improves the availability of loan funds
and permits more favorable interest rates.
Type of Assistance:
FHA mortgage insurance for HUD-approved lenders.
The property must contain at least 5 residential units with complete
kitchens and baths and have been completed or substantially rehabilitated
for at least 3 years prior to the date of the application for mortgage
insurance. The program allows for non-critical repairs that must
be completed within 12 months of loan closing. Projects requiring
substantial rehabilitation are not acceptable under this section
and may not involve the replacement of more than one major system.
The remaining economic life of the project must be long enough to
permit a ten-year mortgage. The mortgage term cannot exceed 35 years
or 75 percent of the estimated life of the physical improvements,
whichever is less. Davis Bacon prevailing
wage requirements do not apply to this program.
maximum mortgage limitation for a purchase transaction is the lesser
(1) 85 percent of HUD appraised value; (2) 85 percent of the acquisition
(3) Section 207 statutory per unit limits, adjusted by the local
Field Office high cost percentage for the locality; or (4) a mortgage
amount supported by 85 percent of net income.
maximum mortgage limitation for a refinance transaction is the lesser
(1) 85 percent of HUD appraised value; (2) Section 207 statutory
per unit limits, adjusted by the local field Office high cost percentage
for the locality; (3) the mortgage amount supported by 85 percent
of net income; or (4) the greater of the cost to refinance or 80
percent of HUD appraised value.
Owners or prospective purchasers of eligible multifamily properties
may apply for insured mortgages through HUD-approved lenders.
All persons are eligible to occupy such projects subject to normal
Section 223(f) is eligible for Multifamily Accelerated Processing
(MAP). The sponsor works with the MAP-approved lender who submits
required exhibits for Firm Commitment application, including a full
underwriting package to the local Multifamily Hub or Program Center
for review. The Multifamily Hub or Program Center reviews the application
to determine whether the proposed loan is an acceptable risk. Considerations
include market need and the capabilities of the borrower. FHA underwriting
analysis must determine that there is enough project income to repay
the loan, taking into account all necessary project expenses. If
the proposed project meets program requirements, the local Multifamily
Hub or Program Center issues a commitment to the lender for mortgage
Applications submitted by non-MAP lenders must be processed by
HUD field office staff under Traditional Application Processing
(TAP). Under TAP, there are only two processing stages: the conditional
commitment stage and the firm commitment stage. The sponsor is required
to have a pre-application conference during the conditional commitment
stage to determine the appraised value and maximum mortgage amount.
At the firm commitment stage the local HUD Multifamily Hub or Program
Center determines the amount of the mortgage available to the purchaser
or refinancing borrower in the proposed transaction. If the proposal
meets FHA program requirements, the local Multifamily Hub or Program
Center issues a commitment to the lender for mortgage insurance.
Section 223(f) of the National Housing Act was added by Section
311(a) of the Housing and Community Development Act of 1974. Regulations
are found at 24 CFR, Part 200. For processing and underwriting instructions
refer to HUD Handbook 4565.1- Mortgage Insurance for the Purchase
of Existing Multifamily Housing Projects available on HUDclips.
Refer to the MAP web site for guidelines and instructions, lender
approval requirements, and MAP coordinators. The program is administered
by the Office of Multifamily Housing Development.
In fiscal year 2013, the Department insured mortgages for 740 projects
with 126,388 units, totaling $7.7 billion.