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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…


FHA® 231:


Arbor provides FHA-insured, long-term, fixed-rate financing for new construction or substantial rehabilitation of seniors apartments restricted to age 62 and above. 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). Term not to exceed 75% of economic life.
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 for age-restricted properties (tenants limited to 62 years and over).
Eligible Borrowers Single Asset Entity (for profit or non-profit).
Underwriting Occupancy Maximum economic underwriting occupancy of:

  • 93% for market rate properties (i.e. at least 20% market rate units, or LIHTC 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 in-place rehabs with at least 90% occupancy and 90% LIHTC restricted at 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 30% 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 Typically 10% year 1, declining 1% per year. Other pre-payment options available subject to market conditions.
Assumable Subject to Arbor and HUD approval and payment of assumption fee.
Good Faith Deposit Based on project type and loan size.
Expense Escrow Yes – sufficient to cover Arbor’s expenses and third-party report costs.
Origination Fee Negotiable
HUD Application Fee Non-refundable. .3% of the loan amount: .15% of the loan amount due to HUD at Pre-application submission; .15% at Firm Application.
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) 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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