542(c) FHA-Insured Multifamily Loan Program

Forms

Frequently asked questions

Purpose
Construction and permanent loans for affordable rental developments.

Eligible Borrowers
Single asset mortgagors, including nonprofit organizations, for profit corporations, joint ventures, limited liability companies, and partnerships.

Eligible Projects
New construction, substantial rehabilitation, refinancing or acquisition of projects having no less than five units per site. Detached, semi-detached, row houses or multi-family structures.

Ownership
Fee simple, renewable lease for at least 99 years, or government agency lease for at least 10 years beyond the end of the term of the loan.

Secondary Financing
MFA mortgage must be the first lien on the property. Secondary financing allowed, subject to MFA approval.

Interest Rates
Current interest rate estimates are available upon request. Actual rates are based on market rates and are fixed prior to loan closing or bond issue date. Advance rate locks are also available, at an additional cost to the borrower.

Loan Term

Not to exceed 35 years for existing properties, and 40 years for new
construction projects.

Maximum Loan Amount
The lesser of

1. 85% of value for existing properties, or 90% for new construction projects as determined by MFA appraisal;
2. the MFA approved costs of a refinancing; or
3. the loan amount which allows for a total debt service coverage ratio of no less than 110%.

Prepayment
Limited, subject to the terms of the loan funding source. Use restrictions may extend beyond the time of prepayment, depending on the provisions of the regulatory agreement.

Reserve Requirements

New construction:
Latent defects reserve of 2.5% of initial loan amount, operating deficit reserve or sustaining occupancy prior to permanent loan closing, and ongoing replacement reserve contributions.

Rehabilitation:
Completion of repairs or escrow of 150% of repair costs, latent defects reserve of 2.5% of initial loan amount, and initial replacement reserve based on MFA reserve needs study.

Operating deficit reserve or sustaining occupancy prior to permanent loan closing, and ongoing replacement reserve Contributions are required.

Affordability Requirements
Owners must meet one of two minimum set-aside requirements which include both income and rent restrictions.

Option A:
40% of the units must be rented to households whose annual income does not exceed 60% of area median income; and an additional 20% of the units must be rented to households whose income does not exceed 120% of area median
income, adjusted for family size as determined by HUD.

Option B:
20% of the units must be rented to households whose annual income does not exceed 50% of area median income; an additional 5% of the units must be rented to households whose income does not exceed 80% of area median income; and an additional 35% of the units must be rented to households whose income does not exceed 120% of area median income, adjusted for family size, as determined by HUD.

Rent Requirements

Rents plus utility costs for the units set aside for households earning no more than 60% of median income shall not exceed 30% of the median income levels specified.