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Mortgage Insurance for Construction or Substantial Rehabilitation of Condominium Projects: Section 234(d)


Section 234(d) insures blanket mortgages for the construction or substantial rehabilitation of multifamily projects to be sold upon completion as individual condominium units.


Section 234(d) insures lenders against the loss on mortgage defaults. The program enables sponsors to develop condominium projects in which individual units will be sold to home buyers.

Type of Assistance:

FHA mortgage insurance for HUD-approved lenders.

Eligible Borrowers:

Private profit-motivated developers and other sponsors who meet FHA requirements for mortgagors.

Eligible Customers:

Families or individuals who are eligible to purchase condominium units. Mortgages for individual units may be insured under Section 234(c).

Eligible Activities:

Insured mortgages may be used to finance construction and substantial rehabilitation of multifamily housing structures where the individual units will be sold as condominiums under Section 234(c). The program has statutory per unit mortgage limits which 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 and pre-sale limitations. Contractors for new construction or substantial rehabilitation projects must comply with prevailing wage requirements under the Davis-Bacon Act.


The sponsor has a preapplication conference with the local HUD Multifamily Region to provide general application guidance and to determine the feasibility of the project before submitting a site appraisal and market analysis (SAMA) application (for new construction projects) or feasibility application (for substantial rehabilitation projects). 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 meet program requirements, the local HUD Multifamily Region issues a commitment to the lender for mortgage insurance.

Technical Guidance:

The 234(d) program is authorized by the National Housing Act (12 U.S.C. 1715y), as amended; Housing Act of 1964, as amended, Section 234(d). Regulations are found in 24 CFR 234. The basic program instructions are in HUD Handbook 4580.1- Mortgage Insurance for Condominium Housing Insured under Section 234(d) available on HUDclips. The program is administered by the Office of Multifamily Housing Development.

Program Accomplishments:

No loans have been insured under this program for several years. Condominium developers typically obtain their own construction financing and use FHA insurance under Section 234(c) to finance the sales of the individual units.