There are more changes underway in guidelines issued by the U.S. Department of Housing and Urban Development (HUD), which are likely to help stimulate the development of affordable housing and new rental housing.
HUD has proposed a significant reduction in Federal Housing Administration (FHA) Mortgage Insurance Premiums (MIP) for all FHA Multifamily Insurance Programs. The changes include a reduction of the initial and ongoing MIP to 25 basis points across all Multifamily Program types, including 221d(4), 223(f), 223(a)(7), 241(a) and 220. The proposed changes would also eliminate the Green, Affordable Housing, and Broadly Affordable Housing MIP categories and apply a lower, uniform MIP rate to all multifamily properties. The formal implementation of the changes will likely take place within 60 days of a 30-day comment period, which ends on July 28.1
The changes will likely not only simplify the MIP structure and ongoing compliance requirements, but also lead to reduced financing costs and potentially higher loan proceeds for all project types, including both market rate and affordable housing developments.
“Coupled with the underwriting parameter changes in early 2025, reducing debt service coverage ratios (DSCR), and increasing loan to value/loan to cost ratios (LTV/LTC), the FHA program is becoming increasingly competitive for market rate and affordable housing projects,” said Todd Weaver, assistant head of PNC Multifamily Capital. “These changes will help support PNC Multifamily Capital in our ongoing mission of increasing the supply of affordable multifamily rental housing.”
1. Proposed Changes in Mortgage Insurance Premiums Applicable to FHA Multifamily Insurance Programs
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PNC Multifamily Capital is one of the largest, comprehensive multifamily debt and equity financing providers within the industry for affordable, seniors housing and conventional products. Each year, PNC Multifamily Capital finances or invests in affordable and seniors housing projects to address the shortage of housing options and help communities thrive. Reach out to PNC Multifamily Capital to learn more, or contact your relationship manager.
