HUD Mortgage Insurance for Rental and Cooperative Housing
HUD 221(d) (3) | HUD 221 (d) (4)

The purpose of these programs is to provide low interest market rates to spur rental housing for moderate income families.

The 221 sections insures mortgage loans to facilitate new construction or substantial rehabilitation of multifamily rental or cooperative housing for moderate-income families, the elderly, and the handicapped.

When implementing new construction or the substantial rehabilitation of an existing apartment or co-op project, the added value must encompass at least 15% of the project’s value upon completion.

HUD - FHA Section 221 (d)(3) and (4) Loan Programs

Location: Nationwide ()
Eligibility: Both for profit 221(d) (4) and for non-profit 221(d) (3)
Eligibility Features: New construction, substantial rehabilitation for five (5) or more dwelling units. Rental apartment housing, cooperative housing projects and rental housing for elderly (independent living) are all eligible project types
Liability: No Personal Liability
Loan-To-Cost: Higher loan-to-cost ratios (90% of total replacement cost for new construction)
Interest Rates: Lower, fixed interest rates for both construction and permanent loans. Permanent loan rates are fixed prior to the closing of the construction loan. Interest only for 36 months during the  construction period
Loan Term: Up to 40 years, structured on a fully amortized basis
Assumable: Permanent loans are fully assumable
Prepayment: Permanent loans may be prepaid
HUD Benefits: HUD mortgage insurance can be used as credit enhancement for taxable or tax-exempt bond issues. Bond proceeds may be used to fund the construction and the permanent loan
Lease Requirement: There are no requirements for lease-up or occupancy ratios prior to conversion to the permanent loan
Ownership: Subject real estate must be held in fee simple or under a long term ground lease
Filing: Borrower must file annual project financial statements
DSCR: U/W requires a minimum 1:11 dscr, using current rents and operating expenses. Trending of rents is not permitted
Phase I: Phase I Environmental analysis required

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