Multifamily Financing FrontiersFFB Risk Sharing
Karen E. KelleherNCSHA Annual Conference & Showplace
Nashville, September 28, 2015
Changing HFA Environment
Need to offer Better Products and Better Terms
FHA Programs Comparison Chart MAP Programs
FHA MAP Insurance Programs (Typically Private, For-Profit Lenders)
Deal Type Light or No Rehab Moderate Rehab with Tax Credit Equity
New Construction or Substantial Rehab
Lending Program 223(f) 223(f) Tax Credit Pilot 221(d)(4)
FHA Risk % 99% 99% 99%
Rehab Per Unit Up to $17,500/Unit Up to $40,000/unit Over $40,000/unit
Davis Bacon Applies? No No Yes
Affordability Required? None None (but LIHTC does)
None
Equity Takeout Permitted?
Yes Yes Yes
Closing Process HUD MAP Underwriting/ Closing Process
HUD Pilot Underwriting/ Closing Process
HUD MAP Underwriting/ Closing process
Best Execution Taxable (GNMA) Tax-Exempt (GNMA) Either
Current Est. Lending Rate 3.41% 3.41% + COI 3.90%
FHA Programs Comparison Chart MAP Programs
FHA MAP Insurance Programs (Typically Private, For-Profit Lenders)
Deal Type Light or No Rehab Moderate Rehab with Tax Credit Equity
New Construction or Substantial Rehab
Lending Program 223(f) 223(f) Tax Credit Pilot 221(d)(4)
FHA Risk % 99% 99% 99%
Rehab Per Unit Up to $17,500/Unit Up to $40,000/unit Over $40,000/unit
Davis Bacon Applies? No No Yes
Affordability Required? None Yes (b/c LIHTC) None
Equity Takeout Permitted?
Yes Yes Yes
Closing Process HUD MAP Underwriting/ Closing Process
HUD Pilot Underwriting/ Closing Process
HUD MAP Underwriting/ Closing process
Best Execution Taxable (GNMA) Tax-Exempt (GNMA) Either
Current Est. Lending Rate 3.41% 3.41% + COI 3.90%
FHA Programs Comparison ChartTraditional HFA Risk-Sharing
HFA Traditional Risk Sharing Program
Deal Type Light or No Rehab Moderate Rehab with Tax Credit Equity
New Construction or Substantial Rehab
Lending Program HFA Risk Share HFA Risk Share HFA Risk ShareFHA Risk % 50-90% 50-90% 50-90%Rehab Per Unit 1 <15% of value <15% of value ≥15% of valueDavis-Bacon Applies? No No YesAffordability Required? 20%@50% of AMI or
40%@60% of AMI20%@50% of AMI or 40%@60% of AMI
20%@50% of AMI or 40%@60% of AMI
Equity Takeout Permitted?
Waiver Required Waiver Required Waiver Required
Closing Process HFA Underwriting,Limited HUD Review
HFA Underwriting, Limited HUD Review
HFA Underwriting, Limited HUD Review
Best Execution Taxable Tax Exempt Tax-ExemptCurrent Est. Lending Rate 5.25% 4.75% 4.95%
[1] 1. Value after rehab. Financing existing project without substantial rehab must be structured as acquisition. See 24 CFR §266.200.[2] 2. Applies only to substantial rehab or new construction of 12 or more units where construction advances are insured.[3] 3. HUD retained reviews include 2530, wage rate, subsidy layering, environmental, unless delegated. If HFA assumes <50% of risk, underwriting and loan terms are subject to HUD right to review, modification and approval by HUD. 5. The risk sharing statute currently prohibits pooling of risk shared mortgages into securities guaranteed by GNMA.
FHA Programs Comparison ChartTraditional HFA Risk-Sharing
HFA Traditional Risk Sharing Program
Deal Type Light or No Rehab Moderate Rehab with Tax Credit Equity
New Construction or Substantial Rehab
Lending Program HFA Risk Share HFA Risk Share HFA Risk ShareFHA Risk % 50-90% 50-90% 50-90%Rehab Per Unit 1 <15% of value <15% of value ≥15% of valueDavis-Bacon Applies? No No YesAffordability Required? 20%@50% of AMI or
40%@60% of AMI20%@50% of AMI or 40%@60% of AMI
20%@50% of AMI or 40%@60% of AMI
Equity Takeout Permitted?
Waiver Required Waiver Required Waiver Required
Closing Process HFA Underwriting,Limited HUD Review
HFA Underwriting, Limited HUD Review
HFA Underwriting, Limited HUD Review
Best Execution Taxable Tax Exempt Tax-ExemptCurrent Est. Lending Rate 5.25% 4.75% 4.95%
[1] 1. Value after rehab. Financing existing project without substantial rehab must be structured as acquisition. See 24 CFR §266.200.[2] 2. Applies only to substantial rehab or new construction of 12 or more units where construction advances are insured.[3] 3. HUD retained reviews include 2530, wage rate, subsidy layering, environmental, unless delegated. If HFA assumes <50% of risk, underwriting and loan terms are subject to HUD right to review, modification and approval by HUD. 5. The risk sharing statute currently prohibits pooling of risk shared mortgages into securities guaranteed by GNMA.
FHA Programs Comparison ChartHFA FFB Risk Sharing Program
[1] 5. Varies by region.
HFA FFB Risk Sharing Program
Deal Type Light or No Rehab Moderate Rehab with Tax Credit Equity
New Construction or Substantial Rehab
Lending Program HUD/FFB Risk Share HUD/FFB Risk Share HUD/FFB Risk ShareFHA Risk % 50% 50% 50%Rehab Per Unit $30,000-$40,000 $30,000-$40,000 >$30,000-$40,000Davis-Bacon Applies? No No YesAffordability Required? 20%@50% of AMI or
40%@60% of AMI20%@50% of AMI or 40%@60% of AMI
20%@50% of AMI or 40%@60% of AMI
Equity Takeout Permitted Waiver Required Waiver Required Waiver RequiredClosing Process HFA Underwriting,
Limited HUD ReviewHFA Underwriting, Limited HUD Review
HFA Underwriting, Limited HUD Review
Best Execution Participation Participation + Short-Term Tax-Exempt
??
Current Estimated Rate 3.71% 3.71% + COI ??
FHA Programs Comparison ChartHFA FFB Risk Sharing Program
[1] 5. Varies by region.
HFA FFB Risk Sharing Program
Deal Type Light or No Rehab Moderate Rehab with Tax Credit Equity
New Construction or Substantial Rehab
Lending Program HUD/FFB Risk Share HUD/FFB Risk Share HUD/FFB Risk ShareFHA Risk % 50% 50% 50%Rehab Per Unit $30,000-$40,000 $30,000-$40,000 >$30,000-$40,000Davis-Bacon Applies? No No YesAffordability Required? 20%@50% of AMI or
40%@60% of AMI20%@50% of AMI or 40%@60% of AMI
20%@50% of AMI or 40%@60% of AMI
Equity Takeout Permitted Waiver Required Waiver Required Waiver RequiredClosing Process HFA Underwriting,
Limited HUD ReviewHFA Underwriting, Limited HUD Review
HFA Underwriting, Limited HUD Review
Best Execution Participation Participation + Short-Term Tax-Exempt
??
Current Estimated Rate 3.71% 3.71% + COI ??
FFB Risk ShareClosing Process /Terms
• Few Differences from Traditional Risk Sharing• Rate Lock Process• Prepayment Lockout• Mortgage Reserve Fund• Final Endorsement/Closing Process
FHA vs. Risk ShareBorrower Choices
Terms– Interest Rate and Fees/Servicing Spread– Term and amortization– LTV Ratio, Loan Amount– Prepayment Rights– Davis-Bacon applicability– Rent/Vacancy Underwriting
Process– Rate Lock Process– Closing Process– Replacement Reserve Draw Process– Credit review
Questions?