The NCHMA Spring Meeting on March 31 in Washington, DC, will feature a panel discussion of the revised MAP Guide and its implications for MAP market studies.

HUD announced a series of clarifications that are effective immediately and will be reflected in a revised Multifamily Accelerated Processing (MAP) Guide. They focus on equal pay-in, bridge loans, identity of interest, subordinate debt, vacancy rates, and developer fees.

HUD will underwrite the fixed minimum pay-in schedule summarized below for all LIHTC transactions, including both pilots and non-pilots. The approach aims to ensure consistency both internally between HUD offices and externally with tax credit investors and other industry professionals. The new standard will be more flexible because the generally pari passu structure will not be precisely proportional to advanced FHA insured loan funds.

Benchmarks for Equity Installments Minimum Equity Installment (Percent of Total Equity) Cumulative Equity Paid In
On or before initial closing

20

20

At 65% construction completion

30

50

At stabilization

45

95

At delivery of IRS Form 8609 or within one year of the date of delivery of the form to investors

5

100

Equity investors will be allowed to substitute bridge loan proceeds for all or part of the payments until the date of the final deadline when the bridge loan must be repaid in full. Any of all of the LIHTC equity paid according to the schedule above can be funded out of partners’ cash, tax credit syndication proceeds, or a temporary bridge loan. If the equity is funded by a bridge loan, the borrower may be the project sponsor or an upper tier entity. The term of the promissory note evidencing a bridge loan may extend to one year following the date of the delivery of the 8609 forms to investors.

To respond to the greater presence of direct investors in the market, FHA has increased the number of transactions in which the MAP lender holds up to a 100% ownership in the LIHTC limited partner from 5 to up to 10 transactions per calendar year. This exception is available to certain supervised or publicly held MAP Lenders. FHA allows any MAP lender to carry a 25% or smaller interest in the tax credit equity on any number of projects.

With the revised MAP Guide, debt including seller financing on LIHTC deals may represent up to 100% of total project costs and be secured by the project so long as the subordinate debt provider agrees to HUD’s standard form of subordination agreement and standstill. Subordinate debt must remain subject to the following conditions:

  • Payments only from surplus cash, if available;
  • Payments for all secondary debt combined not to exceed 75% of surplus cash;
  • Documentation with a promissory note; and
  • Subject to automatic re-subordination in any refinancing of the first mortgage.

New minimum underwritten vacancy and collection loss rates, which will distinguish between classes of multifamily housing, aim to better align FHA practice with the broader multifamily lending market. Underwriting will continue to be at the greater of the minimums below and actual levels.

Minimum Vacancy and Collection Loss Rate Property  Type
3%
  • HUD-assisted property with HAP contract on 90% or more of the units; or
  • In-place rehab with greater than 90% occupancy and greater than 90% of the units set aside as LIHTC units, with attainable tax credit rents at least 10% below market (i.e. a “discount to market).
 5%
  •  80% of the units are set aside as LIHTC units, with attainable tax credit rents at a 10% discount to market.
 7%
  • LIHTC without a 10% discount to market; or 20% or more of the units are Market Rate.

FHA will now underwrite any developer fees up to 15% of Total Development Costs that comply with IRS regulations for the LIHTC program and the prevailing Qualified Allocation Plan (QAP) for any project that is not claiming Builder’s and Sponsor’s Profit and Risk Allowance (BSPRA) or Sponsor’s Profit and Risk Allowance (SPRA).  Projects eligible for BSPRA and SPRA can opt for those costs or a Developer fee.  The Developer Fee now may also be treated as a mortgageable cost.  Waivers of the MAP Guide will be required to implement these changes for individual transactions until the change is published in the MAP Guide later this month.