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How Big is Small Cap Multifamily?

A closer look at the multifamily housing inventory in the United States and the size of the small cap investment opportunity.

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Multifamily Forecast: Investors Moving to Secondary Markets

The apartment sector has remained the darling of the commercial real estate for the past six years. This doesn’t appear to be changing anytime soon, as 2016 is expected to set a new record for multifamily mortgage origination volume. While multifamily’s position as top dog remains uncontested, savvy investors are altering their strategy for sourcing Read the full article…




Arbor provides FHA-insured, long-term, fixed-rate financing for new construction or substantial rehabilitation of multifamily projects nationwide. Applications typically processed as a 2-stage application (Preliminary Application followed by Firm Application). HUD-experienced development teams may request “straight to Firm” application, saving significant time by eliminating the Preliminary Application stage.

Loan Term & Amortization Actual construction period plus 40 years (fully amortizing with interest only payable during construction period).
Maximum Loan Amount Will be the lesser of:

  1. 85% of total eligible development costs (87% for affordable) (90% for 90% project-based rental assistance), replacement cost includes value of land for new construction and as-is value of property for substantial rehabilitation
  2. FHA mortgage statutory per unit limits adjusted for local high cost factor, or
  3. An amount that achieves a minimum debt service coverage, as follows: a) 1.176x DSC for market rate properties b)1.15x DSC for affordable transactions; and c) 1.11x DSC for projects with 90% or greater rental assistance
Eligible Properties New construction or substantial rehabilitation of apartment properties.
Eligible Borrower Single Asset Entity (for profit or non-profit).
Occupancy Requirement Maximum economic occupancy of:

  • 93% for market rate properties
  • 95% for LIHTC properties having at least 80% LIHTC set aside, and rents at least 10% below markets
  • 97% for properties with at least 90% rental assistance contracts (or 90% LIHTC set aside) with rents at least 10% below market
Tax & Insurance Escrows Monthly deposits required.
Recourse Non-recourse – Construction and Permanent.
Commercial Space Maximum 25% of gross floor area and maximum 20% of effective gross income.
Required Reports Market Study, Appraisal, Architect/Cost Review and Phase I Environmental. CPA reviewed financial or last fiscal year – sub rehab.
Prepayment Negotiable. Generally two-year lockout with a 10% to 1% declining pre-payment penalty. Other pre-payment options available.
Assumable Subject to Arbor and HUD approval and payment of assumption fee.
Good Faith Deposit Negotiable based on project type.
Expense Escrow Yes – sufficient to cover Arbor’s expenses and third-party report costs.
Origination Fee Negotiable
HUD Application Fee Non-refundable fee of $3 per $1,000 (0.3%) of the mortgage amount due to HUD with the firm commitment submission package. For market rate pre-applications, a non-refundable review fee of 15 bps (50% of the firm commitment application fee) is due to HUD with the submission of the pre-application package.
HUD Inspection Fee 0.5% of the mortgage amount for new construction. 0.5% of the cost of the repairs for substantial rehab.
Legal/Closing Fee Borrower pays Arbor’s counsel fee and miscellaneous closing costs.
Rehabilitation Qualifications Repairs must exceed $15,000 per unit (adjusted for local high cost factor), 15% of the “as rehabbed” appraised value or replacement of 2 or more major building systems.
Davis Bacon Davis Bacon labor standards and wage requirements apply to construction and rehab work.
HUD Mortgage Insurance Premium Annual MIP Rates:

  • Market Rate Properties: 0.65%
  • Affordable Properties: 0.35%
  • Broadly Affordable or Energy Efficient Properties: 0.25%


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