Purpose
To provide federally insured construction and permanent financing
for small scale affordable housing projects throughout New Mexico.
It is designed to minimize transaction and due diligence costs and
expedite processing for small projects.
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 multifamily structures are eligible.
Eligible Borrowers
Single asset mortgagors, including nonprofit organizations, for-profit
corporations, joint ventures, limited liability companies, and partnerships
are eligible.
Ownership
Fee simple or renewable leasehold for at least 99 years, or government
agency lease for at least 10 years beyond the end of the term of
the loan are allowed.
Secondary Financing
MFA’s mortgage must be the first lien on the property. Secondary
financing is allowed, with MFA approval.
Loan Term
Permitted amortization periods of up to 35 years for existing properties
and 40 years for new construction projects, plus up to 24 months
for construction and lease up are typically available.
Interest Rates & Payments
Construction and permanent loan interest rates are set at loan closing
or conversion. Payments are interest-only during construction, and
amortization occurs over the remaining life of the loan beginning
at conversion.
Maximum Loan Amount
The maximum is $2 million, adjusted as needed for a maximum loan
to value ratio of 85% for existing projects and 90% for new construction,
and for a total debt service coverage ratio of no less than 110%.
Prepayment
Prepayment is prohibited for the first 15 years and prepayment penalties
will apply. Affordable use restrictions typically
extend for 30 or more years.
Recourse Provisions
Loans may be non-recourse to the borrower, except for limited environmental
indemnifications and in some cases, construction loan period guaranties.
Reserves
Requirements include latent defects reserve of 2.5% of initial loan
amount; operating deficit reserve or sustaining
occupancy prior to permanent loan conversion; and ongoing replacement
reserve contributions.
Affordability Requirements
Owners must meet minimum set-aside requirements, (40% of the units
for households with incomes at or below 60% of median
income, or 20% for households with incomes at or below 50% of median
income) as well as MFA’s statutory income limit restrictions.
Rents are set at 30% of the applicable income limit, adjusted for
family size and utility costs.
Underwriting Approval
Approvals are conditioned upon MFA’s satisfactory review of the
appraisal, site and market analysis, development team capacity, design,
rehabilitation and other development costs, affirmative fair housing
marketing plans, operating budget and environmental reports. HUD Approvals
are required for principals’ previous participation, environmental
and intergovernmental reviews. All Tax Credit projects are subject to
subsidy layering review.
Linda Bridge
Senior Development Program Manager
Main: (505) 843-6880
Direct: (505) 767-2262
Fax: (505) 242-2766
