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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…

GENERAL: 800.ARBOR.10

FHA®221(d)(4):

NEW CONSTRUCTION AND SUBSTANTIAL REHAB

Arbor provides FHA-insured, long-term, fixed-rate financing for new construction or substantial rehabilitation of multifamily projects nationwide. Applications are typically processed as a two-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 Construction loan period (interest-only), followed by 40-year permanent (fully amortizing)
Maximum Loan Amount The lesser of:

  1. 85% of total eligible development costs (for market rate); 87% for LIHTC restricted; 90% for properties with at least 90% rental assistance; development 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: a) 1.176x DSC for market rate properties; b) 1.15x DSC for LIHTC restricted; and c) 1.11x DSC for properties having at least 90% rental assistance
Eligible Properties New construction or substantial rehabilitation of apartment properties
Eligible Borrower Single asset entity (for profit or nonprofit)
Underwriting Occupancy Maximum economic underwriting occupancy of:

  • 93% for market rate properties (i.e., at least 20% market rate units, or LIHTC unit whose rents are < 10% below market rents)
  • 95% for LIHTC restrictions on at least 80% of units at rents at least 10% below market
  • 97% for properties having at least 90% rental assistance, or 90% LIHTC set aside with rents at least 10% below market
Tax & Insurance Escrows Monthly deposits required
Recourse Nonrecourse – construction and permanent
Commercial Space Maximum 25% of gross floor area and maximum 20% of effective gross income; 20% vacancy rate applied
Required Reports Market Study, Appraisal, Architect/Cost Review and Phase I Environmental; CPA reviewed borrower financial or last fiscal year – sub rehab
Prepayment Typically 10% year one, declining 1% per year; other prepayment options available subject to market conditions
Assumable Subject to Arbor and HUD approval and payment of assumption fee
Good Faith Deposit Negotiable based on property type and loan size
Expense Escrow Yes – sufficient to cover Arbor’s expenses and third-party report costs
Origination Fee Negotiable
HUD Application Fee Nonrefundable – 0.3% of the loan amount: 0.15% of the loan amount due to HUD at pre-application submission; 0.15% at firm application
HUD Inspection Fee 0.5% of the mortgage amount for new construction; 0.5% of the cost of 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) or replacement of two or more major building systems
Davis Bacon Davis Bacon labor standards and wage requirements apply to construction and rehab work
HUD Mortgage Insurance Premium (MIP) Annual MIP Rates

  • Market rate properties: 0.65%
  • Affordable properties: 0.35%
  • Broadly affordable or energy efficient properties: 0.25%

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