HUD Expands LIHTC Pilot to New Construction and Substantial Rehab Projects
HUD’s Office of Multifamily Housing Programs recently published a Housing Notice and related Mortgagee Letter that expands the use of an LIHTC pilot program into New Construction and Substantial Rehabilitation loan products under Sections 221(d)(4) and 220.
The expanded pilot program will ensure faster and more efficient processing for low-risk, LIHTC transactions by eliminating redundant reviews. Originally, Housing Notice 2012-1 launched an LIHTC pilot program mandated by the Housing and Economic Recovery Act of 2008 (HERA). The pilot created a separate processing track for projects under the Section 223(f) refinancing program. The pilot has been very successful and has resulted in a large increase in the number of insured mortgages provided under Section 223(f) that support projects with LIHTC.
The new pilot introduces two modified processing tracks for Section 221(d)(4) and Section 220 new construction and substantial rehabilitation projects. The two processing tracks are defined as the “Expedited Approval Process” track and the “Standard Approval Process” track. Under the Expedited Approval Process track, HUD’s review will be limited, and HUD will rely on the lender’s due diligence during both the underwriting and construction phases. Under the standard approval process track, HUD staff will perform a more thorough review during the underwriting phase and rely on additional lender oversight during the construction phase.
Average processing time for LIHTC deals is currently 90 days. Under the Federal Housing Administration’s pilot, processing times are reduced to 30 days under the Expedited Approval Process track and 60 days under the Standard Approval Process track. Federal Housing Administration (FHA) multifamily transactions that include LIHTCs account for approximately 30 percent of FHA’s total multifamily volume. By aligning FHA’s Section 221(d) and Section 220 programs with the LIHTC program, it’s expected FHA will support more production and preservation of critically needed affordable multifamily housing.