FHA Section 220 Mortgage Insurance Program

PURPOSE To provide funding for the new construction or substantial rehabilitation of apartments, cooperatives, and single room occupancy projects (SROs). This program also provides permanent take-out financing upon completion of construction. ELIGIBLE PROJECTS Please contact Paragon for a complete list of eligibility requirements for this program. Section 220 properties must be located in specific eligible areas. For a project with substantial rehabilitation planned, it is considered eligible for substantial rehab when the cost of work will be in excess of $6,500 per unit multiplied by the area high cost factor, or when two or more major building components must be replaced. Apartments specifically designed for the elderly and/or limited to elderly occupancy are not permitted under this program. INTEREST RATE Fixed-rate, based on the sale of GNMA securities, market tax-exempt and taxable bonds. A Mortgage Insurance Premium of 0.70% will be added to the final rate (0.45% for LIHTC deals) LOAN TERM Up to 40 years plus construction period, fully amortizing. COMMERCIAL SPACE Permissible, but not to exceed 20% of total gross rentable area. Also, commercial income cannot exceed 30% of the estimated total gross project income. ASSUMPTION/PREPAY Fully-assumable; Prepayment is negotiable. DAVIS BACON WAGE The Department of Labor’s published wage and fringe benefits must be paid during construction. MAXIMUM MORTGAGE AMOUNT For a new construction project, the loan amount will be the lesser of: (1) The amount of debt that can be serviced by 83.3%, 87%, or 90% of net operating income for market rate, affordable, or rental assisted properties, respectively. (2) Up to 83.3%, 87%, or 90% of replacement cost for market rate, affordable, or rental assisted properties, respectively. (3) Statutory mortgage limits per unit as designated by HUD OTHER COSTS (1) Mortgage Insurance Premium (MIP) – 0.70% per year (.45% for LIHTC). (2) Working Capital Reserve – 4% of loan amount. (3) Operating Deficit Escrow – To be determined. (4) Performance and Payment Bond equal to 100% of estimated construction/rehab costs, or Assurance of Completion Agreement secured by cash/L.C. for 15% of construction/rehab costs. Nothing contained herein is intended to be, nor should it be construed as, a commitment to lend on these or any other terms. Arizona MB007451