FHA Reduces Mortgage Insurance Premiums on Multifamily Mortgages

February 8, 2017
Authors: Ken McBride, McBride Capital
Publishers: HFO Apartment Investor Newsletter

Insurance approval photoHUD has announced that Mortgage Insurance Premiums (MIPs) will be reduced for FHA-insured loans on affordable and energy-efficient multifamily properties. Owners of qualifying properties may want to consider refinancing with HUD once these changes are made in order to receive significant savings in their premiums.

The purpose of this change is to expand and improve Broadly Affordable, Affordable and Green/Energy Efficient housing and encourage the construction and financing of these properties. The rates became effective on April 1, 2016.

Here is a summary of the changes and proposed rates:

  • Qualifying Broadly Affordable properties will be reduced to 25 basis points. These include properties with 90% or more in tax credit or Section 8 housing.
  • Affordable housing’s MIPs with 10-90% in tax credit or Section 8 housing will be reduced to 35 basis points. This is a reduction of 10 to 35 basis points from current rates. It appears that this change will also include properties with inclusionary zoning, density bonus set-asides and other local affordability restrictions, as long as they meet certain requirements. These requirements are as follows: there must be a minimum 10% of units affordable to 80% AMI or lower with rents at 30% of income; set-aside must be for at least 30 years after final endorsement of a FHA-insured loan; properties must be monitored by public authority; and the owner must agree to accept Section 8 voucher holders.
  • Green and Energy Efficient Housing will be reduced to 25 basis points, a reduction of 20 to 45 basis points from current rates. This is a major step in increasing the amount of Green and Energy Efficient housing available for tenants, by decreasing energy costs and lowering greenhouse gas emissions.
  • In order to qualify, the project must achieve (or will achieve and maintain) an industry recognized standard for green buildings. The acceptable standards are: Enterprise Green Communities Criteria, U.S. Green Building Council’s LEED-H, LEED-H Midrise, LEED-NC, ENERGY STAR Certification, EarthCraft House, EarthCraft Multifamily, Earth Advantage New Homes, Greenpoint Rated New Home, Greenpoint Rated Existing Home (Whole House or Whole Building label), and the National Green Building Standard (NGBS), or other industry recognized green building standards in HUD’s sole discretion. The projects must also achieve (or will achieve) a score of 75 or better on the 1-100 Energy Star Score.

Ken McBrideFor any questions or to learn more about these changes, please email Ken@mcbridecapital.com or call 503-624-5800. Website: http://www.mcbridecapital.com