FHA Section 221(d)4 Mortgage Insurance Program

PURPOSE To provide funding for the new construction or substantial rehabilitation of apartments. This program also provides permanent take-out financing upon completion of construction. ELIGIBLE PROJECTS A multifamily property with at least 5 units. All units must have kitchens/bathrooms (except SROs) and comply with local building codes. A project 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. INTEREST RATE Single fixed rate for both the construction and lease up period and the permanent loan term, determined by market conditions at the time of the rate lock. Rate lock deposit is 0.5% and refunded at closing. LOAN PARAMETERS For loan amounts up to $75 Million Property Type Maximum Loan to Eligible Cost Minimum Debt Service Coverage Subsidized 90% 1.11x Affordable* 87% 1.15x Market Rate 85% 1.176x   For loan amounts $75 million and above, although HUD may impose more restrictive limits on loan amounts over $100 million Property Type Maximum Loan to Eligible Cost Minimum Debt Service Coverage Subsidized & Affordable* 80% 1.25x Market Rate 75% 1.30x   In addition, loan cannot exceed the programmatic per-unit maximum as adjusted by HUD for project location (area high cost factor). LOAN TERM Interest-only term equal to actual construction period plus 2 months for cost certification followed by 40 years fully amortizing. COMMERCIAL SPACE Limited to 25% of net rentable area and 15% of underwritten effective gross income (up to 30% of underwritten EGI permitted in urban renewal areas under section 220) ASSUMPTION/PREPAYMENT Negotiable with best pricing for 10 years of call protection ( can be a combination of lockout and/or penalty); loan is fully assumable subject to HUD approval. DAVIS BACON WAGE Payment of prevailing wages, as determined by the Department of Labor, is required for all contractors and subcontractors. ESCROWS Prior to construction, reserves for interest, taxes, insurance, working capital (4% of mortgage), and initial operating deficit; balances will be released to the borrower after 6 consecutive months of break-even operations. Post Construction, taxes insurance and mortgage insurance premium will be escrowed monthly and a capital needs reserve maintained with monthly deposits in accordance with HUD guidelines on a property-specific basis (minimum $250/unit/year). 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