section 221(d)(4)


The purpose of the program is to provide attractive long term financing for the construction or substantial rehabilitation of multifamily rental housing. The loan is both a construction and permanent loan. The program provides for competitive interest rates without restriction on rental rates, cash flow or income levels of residents.


A. Personal Liability: Loans are non-recourse to the owner and secured solely by the property.

B. Amortization: 40-year schedule.

C. Term: 40-year term.

D. Loan Amount: The maximum insurable mortgage is the lesser of:

1. 90% of cost allowed by HUD, or

2. The amount of debt supported by 90% of the projected net operating income.

E. General Contractor’s Fee The program allows a general contractor’s fee or, in lieu of such fee, a Builder’s and Sponsor’s Profit and Risk Allowance (BSPRA). BSPRA is an amount equal to 10% of the development costs of the project excluding land. BSPRA is treated as a credit to reduce the equity requirements. It is therefore possible to realize funding in excess of 90% of the development cost.

F. Substantial Rehabilitation: The program allows for financing of apartments in need of rehabilitation if:

1. The cost of repairs, replacements and improvements exceeds the greater of:

a. 15% of the property’s value after completion of repairs, replacements and improvements

b. $6,500 per dwelling unit (adjusted by the applicable high cost factor), or

2. More than one major building component is being replaced; such as, roof, ceiling, walls, floor structures, foundation, plumbing, HVAC or electrical system.

G. Units: The property must contain five or more dwelling units with each unit providing a complete living facility.

H. Commercial Areas & Income: Commercial areas may not exceed 20% of the total net rentable area of the property nor may commercial income exceed 25% of the estimated gross project income.

I. Interest Rates: Fixed rate during construction and the permanent phase of the loan determined by market rates at the time of rate lock.

J. Assumability: Fully assumable.

K. Pre-Payment Provisions: Negotiable, but typically closed for five years then open to pre-payment at 5% of the outstanding loan balance in year 6, declining 1% per year.