Washington, D.C.–The Department of Housing and Urban Development announced recently that it would no longer consider the price of land in its computation of mortgage limits for FHA-insured developers. The ruling covers 221 (d) 4, as well as 223 (f) and other programs.
The ruling is a step forward in opening up the nation’s high-cost areas to FHA financing, according to Mark Humphreys, CEO of Humphreys Partners Architects, L.P.
“Adjusting the costs that can be insured by eliminating the costs attributable to land is a big step toward opening up the nation’s high-cost areas to FHA financing,” Humphreys says in an email analyzing the HUD ruling. “This will have a range of impacts, depending on the specific multifamily program, but, overall, it provides a boost in most high-cost markets where FHA financing has been unavailable.”
Section 221 (d) 4 insures mortgage loans to facilitate the construction or rehabilitation of multifamily rental or cooperative housing for moderate income families, the elderly, and the handicapped. The program provides FHA mortgage insurance for HUD-approved lenders.
The 221 (d) 4 loans are non-recourse, and both construction and permanent. Borrowers can obtain loans up to 90 percent of the HUD/FHA replacement cost estimate.