A HUD program that provides federal mortgage insurance on a private lender's loan to buy or refinance an existing apartment property of five or more units.
Section 223(f) of the National Housing Act lets HUD provide mortgage insurance on a loan made to purchase or refinance an existing multifamily housing project. HUD does not lend. A private lender that works under HUD’s Multifamily Accelerated Processing rules, called a MAP lender, underwrites and closes the loan, and HUD’s insurance protects that lender against loss.
HUD’s MAP Guide sets the outline. The property must contain at least 5 residential units. Properties that need substantial rehabilitation are not eligible, though repairs can be part of the loan. By regulation the term on an existing project can run 35 years, limited to 75% of the remaining economic life of the improvements, with a 10-year minimum. The note is non-recourse to the borrowing entity, with personal liability reserved for certain bad acts.
Borrowers weigh that long, fully amortizing, fixed-rate term against the process. HUD reviews the file as well as the lender, the borrower pays a mortgage insurance premium, and the property signs a regulatory agreement. Loan sizing ratios are set by HUD and change, so get the current ones from a MAP lender.
How it shows up in the data here
No field here marks a loan as FHA 223(f). HUD does not make the loan, so the lender of record is a private mortgage lender, and many of those appear in HMDA multifamily data even though they are not banks. See multifamily lenders and non-bank lenders with multifamily loans. HMDA does not tell you which of a lender's loans carried HUD mortgage insurance.
Go further
- Multifamily lenders: Lenders with multifamily loans on the public record.
- Amortization and balloon calculator: See what a long, fully amortizing term does to the payment.
- Amortization and balloon calculator: Payment, balance at maturity and interest paid, for a loan that amortizes over longer than it runs.
- DSCR calculator: Cash flow over debt service. Type the cash flow and the loan terms, see the ratio and the cushion before it falls to 1.00x.
- Multifamily loan checklist for 5+ unit properties: A larger apartment loan can go to five kinds of lender. They want much the same package. They differ on recourse, term, prepayment, speed and what they ask of the sponsor.
Related terms
- FHA 221(d)(4) loan: A HUD program that provides federal mortgage insurance on a private lender's loan to build or substantially rehabilitate rental apartments.
- Agency lender: A lender authorized to make apartment loans that Fannie Mae or Freddie Mac then buys or backs, under those companies' rules instead of the lender's own.
- Multifamily (5+ units): Residential rental property with five or more units. Banks, credit unions and HMDA all draw the line between four units and five.
- Permanent loan: A longer-term loan on a finished, leased property that replaces the construction or bridge loan and is repaid from the property's income.
- Non-recourse loan: A loan the lender can collect only from the property pledged for it, not from the guarantor personally, except for listed bad acts.
- Amortization: The schedule on which a loan's principal is paid down through regular payments. The amortization period sets the payment size and can be longer than the loan's term.
- Replacement reserves: Money set aside, or an expense assumed by the lender, for periodic replacement of capital items such as roofs, heating and cooling systems and parking lots.
Sources
Plain definitions for orientation, not legal, tax or credit advice. A lender's own policy decides what it will do.