Eligible Properties:
Proposed new construction or substantial rehabilitation apartment properties In order to qualify as a substantial rehabilitation project either (1) the cost of repairs, replacements and improvements exceeds the greater of 15% of the estimated replacement cost after completion of all repairs, or (2) $6,500 per unit adjusted by the local HUD high cost percentage; or two or more building systems are being replaced
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Loan Type: Construction loan plus up to 40-year permanent loan |
Maximum Loan:
New Construction:
Amount equal to the lesser of:
- Statutory unit mortgage limits adjusted by cost not attributable to dwelling use; or
- 90% of the HUD estimated replacement cost; or
- 1.11 debt service coverage Substantial Rehabilitation Projects: Amount equal to the lesser of the three criteria above; or
90% of the sum of the HUD estimated cost of repair and rehabilitation and the "as is" value of the property
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Interest Rates:
Fixed rate determined by market rates at the time of rate lock
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Amortization:
Construction loan which converts into a 40-year, fully amortizing loan
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Personal Recourse:
Non-recourse
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Assumability:
Assumable, subject to CWCapital approval
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Subordinate Financing:
Generally not permitted, special requirements apply
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Prepayment: Negotiable
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Wage Requirements:
Adherence to Davis-Bacon prevailing wage laws is required
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Annual Mortgage Insurance Premium:
During the construction period, 0.8% of the loan amount is paid annually in advance. After commencement of amortization, 0.8% of the average principal balance is escrowed on a monthly basis
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Escrows:
Monthly escrows for real estate taxes, property insurance, reserves for replacement (as determined by HUD) and mortgage insurance premiums
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Commercial Space:
Up to 10% of the gross floor area of the project. Commercial income cannot exceed 15% of gross project income
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Environmental Issues:
Special rules apply for properties which are located in Flood Hazard Zones as designated by FEMA
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Application Fee:
A non-refundable fee of 0.3% of the requested mortgage amount is payable to HUD at the time of application, plus estimated underwriting costs for market study, appraisal, architectural/engineering report, cost analysis, environmental assessment and other loan processing costs
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Inspection Fee:
For New Construction projects, 0.5% of the mortgage amount is payable to HUD at Initial Endorsement. For Sub-Rehabilitation Projects, 0.5% of the cost of improvements is paid to HUD at Initial Endorsement
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Financing and Placement Fees: Negotiable
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Closing Expenses:
Standard transaction costs, including legal fees, title insurance and survey
BSPRA Program permits the use of a Builders and Sponsors Profit and Risk Allowance for the partial fulfillment of the equity requirement of the loan
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Other HUD Requirements:
Cash escrows or letters of credit are required for the following:
- Forecasted operating deficits, to be released one year after final endorsement if breakeven operations have been achieved
- 2% of the mortgage amount for working capital, to be released one year after project completion if loan is not in default
- 100% performance and 100% payment bond or a letter of credit equal to 15% or 25% (depending on structure type) of the construction contract
- If not covered by performance and payment bond, 2.5% of the construction contract amount as latent defects guarantee
- 100% of off-site construction costs
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HUD Processing Time:
Two stages for HUD Multifamily Accelerated Processing (MAP) procedures:
- Pre-Application Stage: 45 days for review
- Firm Commitment Stage: 45 days for review
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Preliminary Submission Package:
Include the following in your request for a loan quote:
- Property description and location map
- Number of units with breakdown of proposed rents by unit type
- Pro forma operating budget, including breakdown of other income
- Development cost estimate
- Acquisition cost of land
- Sponsor resume
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