HUD just announced a major shift that’s likely to benefit a wide range of multifamily borrowers. Going forward, all HUD multifamily loans will qualify for the agency’s lowest Mortgage Insurance Premium (MIP) rate of 0.25%, regardless of whether the property is affordable, energy-efficient, or market rate. That’s a big change — and a welcome one — for developers and owners alike.
This update applies across the board, including HUD’s core loan programs like 221(d)(4) for new construction and 223(f) for refinances and acquisitions. For market-rate borrowers, the impact is especially significant. With the 221(d)(4) program, this change could lower interest rates by about 0.40%, reduce closing fees, and eliminate the need for costly energy-efficiency reports, which typically run around $50,000. For those using the 223(f) program, it means roughly a 0.35% reduction in interest rates, lower upfront costs, and potential savings of around $25,000 by avoiding optional due diligence reports.
While the policy is currently open for public comment over the next 30 days, it’s expected to take effect within 60 days.
But that’s not the only update HUD is rolling out. They’ve also adjusted their underwriting standards, now allowing debt coverage ratios as low as 1.11x and loan-to-cost or loan-to-value ratios up to 90%. Refinance timing is also getting more flexible — HUD will now consider 223(f) refinance applications earlier, even before a property hits one month of stabilized coverage. On the regulatory side, they’re working to remove some of the friction in the environmental and underwriting review process. And after a long-standing ban, HUD is once again willing to look at financing for small-unit subdivisions on a case-by-case basis.
All in all, this is one of the most borrower-friendly updates HUD has made in years. If you’re working on a project or considering a refinance, these changes could make a meaningful difference. Let me know if you’d like to talk through how this might apply to your deal.
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Karen Schimpf
(512) 358-1511
karen@applycommercialloans.com
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