The Department of Housing and Urban Development (HUD) provides reinsurance
on multifamily housing projects whose mortgage loans are originated,
underwritten, serviced, and disposed of by Qualified Participating
Entities (QPEs) and/or their approved lenders. Section 542(b) encourages
the development and preservation of affordable housing. The program
was developed as a demonstration program to test innovative mortgage
insurance and reinsurance products to provide affordable multifamily
housing through a partnership between the QPEs and HUD. HUD's mortgage
credit enhancements are used to support the underwriting and production
strengths of Fannie Mae, Freddie Mac, and other qualified Federal,
State, and local public financial and housing institutions.
A related program is the Housing Finance Agency Risk-Sharing Program
The program provides a new insurance authority independent of the
National Housing Act. The purpose of the program is to support and
encourage the production and preservation of affordable Housing.
The program provides insurance and reinsurance for multifamily housing
projects whose loans are originated, underwritten, serviced, and
disposed of by a QPE and/or its approved lenders.
Type of Assistance:
Guaranteed/Insured Loans. A QPE and/or its approved lenders may
originate and underwrite affordable housing loans. If there is a
default, the QPE will pay all costs associated with loan disposition
and will seek reimbursement from HUD. The HUD risk share will be
50 percent pro rata. The program enables HUD to provide alternative
forms of Federal credit enhancement to increase affordable multifamily
HUD selectively invites QPEs to participate in a variety of mortgage
options to assess the effectiveness of the various credit enhancements.
The QPE and HUD enter into Risk-Sharing agreements to implement
the program. A QPE or its lender, in turn, makes loans to investors,
builders, developers, public entities, and private nonprofit corporations
Eligible mortgagors include investors, builders, developers, public
entities, and private non-profit corporations or associations may
apply to a qualified QPE and/or its lender.
Individuals, families, and property owners are eligible.
To obtain mortgage insurance, a potential lender should consult
with a HUD-approved QPE to obtain mortgage insurance. The potential
lender then submits an application directly to the QPE. If the QPE
refuses the application, the applicant may modify the application
and reapply. While QPEs are vested with a large amount of responsibility
for projects, HUD has the authority to adjust the mortgage amount
and endorse the note.
The program is authorized by the Housing and Community Development
Act of 1992, Section 542(b), Public Law 102-550, 12 U.S.C. 1707.
There are no program regulations; requirements are set forth in
risk-sharing agreements with the QPEs. Section 235 of HUD's FY 2001
Appropriations Act, Public Law 106-377, amended Section 542, which
changed the Risk Sharing Pilot Program to a permanent multifamily
insurance program. The program is administered by the Office of
Multifamily Housing Development.
In fiscal year 2013, the Department insured mortgages for 40 projects
with 4929 units, totaling $315 million.