Housing and Urban Development (HUD)

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NEW CONSTRUCTION AND SUBSTANTIAL REHABILITATION

• High leverage construction/permanent financing
• Permanent interest rate locked prior to construction
• Interest rate modification program available post completion

Market Rate Properties

• Maximum 85% loan-to-cost
• 1.176x DSCR with 7% vacancy
• Statutory mortgage limitation (per unit)

Affordable Properties
(LIHTC Minimums)

• Maximum 87% loan-to-cost
• 1.15x DSCR with 5% vacancy
• Statutory mortgage limitation (per unit)

Rent Assisted Properties
(Section 8)

• Maximum 90% loan-to-cost
• 1.11x DSCR with 5% vacancy
• Statutory mortgage limitation (per unit)

Interest Rate and Term

• Fixed interest, same rate for construction and permanent phases
• Construction phase +40-year permanent amortization
• Interest only during construction
• Fully amortizing
• Conversion to permanent phase at construction completion (no DSCR test for conversion)

Prepayment

• Flexible 10 year prepayment structure

Additional Requirements

• Davis-Bacon Act prevailing wages apply
• New Construction Escrows
  (1) Working Capital: 4% of loan amount
  (2) Operating Deficit Escrow: 3% of loan amount
• Substantial Rehab Escrows:
  (1) Working Capital: 2% of loan amount
  Waivable for certain Rent Assisted or LIHTC properties
• Cost certification required for market rate properties
• Limits on commercial income and space apply; 20% minimum vacancy

APPLICATION TIMELINE

Market Rate (Two-Stage Processing)

• 30 days | Concept submission and meeting with HUD
• 45-60 days | Pre-application underwriting by Berkadia (app, mkt study, phase I)
• 45-60 days | HUD pre-application review
• 45-60 days | Firm application underwriting by Berkadia (100% plans/specs)
• 45-60 days | HUD firm application review
• 45-60 days | Rate lock and closing

Affordable/Rent Assisted (Single-Stage Processing)

• 45-60 days | Firm application underwriting by Berkadia
• 45-60 days | HUD firm application review
• 45-60 days | Rate lock and closing

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REFINANCE OR ACQUISITION

• 35-year, fixed-rate financing
• Ability to modify interest rate during term
• High-leverage permanent financing

Market Rate Properties

• 85% loan-to-value (80% if cash-out)
• 1.176x DSCR with 7% vacancy
• Statutory mortgage limitation (per unit)

Affordable Properties
(LIHTC Minimums)

• 87% loan-to-value (80% if cash-out)
• 1.15x DSCR with 5% vacancy
• Statutory mortgage limitation (per unit)

Rent Assisted Properties
(Section 8)

• 90% loan-to-value (80% if cash-out)
• 1.11x DSCR with 3% vacancy
• Statutory mortgage limitation (per unit)

Interest Rate & Term

• 35-year rate (fully amortizing) subject to market conditions at time of rate lock

Prepayment

• Flexible 10-year prepayment structure

Additional Requirements

• Initial deposit to replacement reserve
• Annual deposit to replacement reserve
• Annual audited financial statements
• Surplus cash distributions monthly

Heavy 223(f)

• Non-critical repairs up to $40,000 per unit
• Project architect required
• Lender Needs Assessor reviews planned scope of work
• Detailed plans of scope of work and cost estimate required
• Davis-Bacon Act does not apply to Heavy 223(f)
• General Contractor could be required

APPLICATION TIMELINE

Preliminary Loan Analysis

• Initial loan sizing
• Based on information provided by sponsor

Concept Submission and Meeting | 30 days Optional

• Limited review of property information and sponsor
• No third-party reports required

Berkadia Firm Application Underwriting | 45-60 days

• Third-party due diligence
• Collect required forms, certifications, and documents
• CPA review of property operating statement for prior fiscal year
• Obtain green certification, if applicable

HUD Firm Application Review | 45-60 days

• HUD property inspection
• National/regional loan committee review (depending on loan size)
• HUD firm commitment

Closing (Final Endorsement) | 45-60 days

• Interest rate lock
• Closing and loan documents review
• Completion of critical repairs