Apartments - New Construction / Substantial Rehabilitation
HUD Section 221(d)(4) Mortgage Insurance Programs

(http://www.rockportmortgage.com:80/print/termsheets/apartments/221d4.php)

Purpose
Provides mortgage insurance for proposed apartment projects and rehabilitations including elderly projects.
Eligible Borrowers
Profit motivated, or non-profit single purpose entities.
Territory
Nationwide
Maximum Loan
the lesser of:
1. 90% of replacement cost, or
2. Amount of debt that can be serviced by 90% of net income.
3. HUD statutory limit
Personal Liability
None
Prepayment
Negotiable. Typically closed for the construction period and the first two years after construction, then open to prepayment at 8% in year three, declining 1% per year thereafter. Prepayment structures can vary based on the needs of a client.
FHA Application Process
An application fee of 0.3% of the requested mortgage amount is payable to HUD at the time of application.
Builder/Developer's Profit
Builder and sponsor’s profit and risk allowance equal to 10% of all costs other than land.
FHA Inspection Process
1. 0.5% of loan amount (new construction)
2. 0.5% of costs associated with construction (sub rehab)
Mortgage Insurance Premium
0.45% at closing for each year of the construction period, then .45% annually.
Funding
Qualifies for government insured mortgage-backed securities (GNMA) or direct placement or may be used to credit-enhance tax-exempt bonds.
Interest Rate
Subject to market conditions.
Amortization
40 years
Financing Fee
Negotiable
HUD Processing Timeframe
60-90 days