HUD Publishes FHA-HFA Multifamily Risk-Sharing Final Rule

HUD published its final rule amending existing regulations for the Section 542(c) Housing Finance Agencies (HFA) Risk-Sharing Program. The final rule adopts without substantive changes the March 8, 2016, proposed rule. The rule is intended to better align the Risk-Sharing program regulations with current industry and HUD policies and practices and provide greater flexibility for program participants. Some of the key changes included in the final rule include:

  • Allowing certain loans made by Level I HFAs (those that assume 50 percent or more of the risk of the loans) not to be regularly amortizing, provided the loans have a minimum term of 17 years and HUD approves the HFA’s underwriting standards, loan terms and conditions and asset management and servicing procedures;
  • Making the program easier to use for preservation deals by expanding the ability to ensure equity take-out loans for refinancing and acquisition deals and amending the definition of substantial rehabilitation;
  • Applying the same underwriting standards to supportive housing developments financed by Level I HFAs as currently used for Section 202 developments for the elderly, thereby allowing the use of contract rents in the loan underwriting process; and
  • Requiring recertification every five years of the underwriting standards, loan terms and conditions, and asset management and servicing procedures for Level II HFAs (those that assume less than 50 percent of the risk of loss on mortgages insured under this program).