The Department of Housing and Urban Development announced this week that the Federal Housing Administration is expanding its low-income housing tax credit financing program for multifamily properties.
According to HUD, the move is a “significant expansion” of an FHA pilot program that streamlines mortgage insurance applications for affordable housing developments that have equity through the LIHTC program.
Back in 2012, the FHA rolled out a LIHTC pilot program that dealt specifically with applications to refinance mortgage debt under FHA's Section 223(f) program.
Under the new expansion, FHA will begin to support “new construction and substantial rehabilitation” under its Section 221(d)(4) and Section 220 programs.
“Today, we take another important step to stimulate capital investment in affordable housing at a time when we need affordable housing more than ever,” HUD Secretary Ben Carson said in a statement. “We’re also applying the lessons we’ve learned from our earlier pilot program to streamline our processing for new construction and substantial rehabilitation developments, so we can get these deals done quicker and more efficiently.”
According to HUD, the FHA’s expanded pilot program will “ensure faster and more efficient processing for low-risk, LIHTC transactions by eliminating redundant reviews.”
Per details provided by HUD, the average processing time for LIHTC deals is currently 90 days.
But under the FHA pilot, processing times are shortened to 30 days under the Expedited Approval Process track and 60 days under the Standard Approval Process track.
“A shorter application review period allows borrowers to lock in better interest rates sooner, an important capability in a rising interest rate environment,” HUD stated in a release.
The move has the potential to have significant impact on the multifamily financing space. According to HUD, FHA multifamily transactions that include LIHTC financing make up approximately 30% of the FHA’s total multifamily volume.
And the FHA expects that by including its Section 221(d) and Section 220 programs with the existing LIHTC program, the FHA will “support more production and preservation of critically needed affordable multifamily housing.”
For much more on the FHA LIHTC expansion, click here.