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LIHTC Pilot Program

Permanent Financing for Affordable Housing

Overview of the Program

This program provides permanent financing for affordable rental apartments with 4% or 9% Low Income Housing Tax Credits (LIHTCs) including projects with Section 8 HAP contracts

Eligibility and Purpose

Eligible Properties*


Newly constructed stabilized properties so long as building permits are pulled prior to September 18, 2014 Permanent financing processed under waiver of three year rule
Re-syndicated tax credit projects Permanent financing for acquisition and/or refinance with moderate rehabilitation up to $40,000/unit
Affordable apartment buildings with 90% of units with project-based rental assistance with new LIHTCs
Permanent financing for acquisition and/or refinance with moderate rehabilitation up to $40,000/unit

*Eligiblity waivers will be considered for existing market-rate or affordable properties, without Section 8 or existing LIHTCs, but with current tax credit or bond cap allocations

Maximum Loan

Loan cannot exceed $25 million

Loan Constraints

Property Type


Refinance LTC

Acquisition LTC


Subsidized 87% 100% 87% 1.15x
Affordable 85% 100% 85% 1.176x

Interest Rate

Fixed rate subject to market conditions at rate lock. Annual and upfront Mortgage Insurance Premium (MIP) ranges from 0.25% to 0.35%

Maximum Term/Amortization

Lesser of 35 years, or 75% of remaining economic life. Level principal and interest payments


Yes, with FHA approval


Step down prepayment penalty through year ten is typical

Fees & Expenses

Borrower is responsible for normal 223(f) fees and costs, in addition to those created by the use of short term bonds and LIHTCs; however, all fees will be priced into the deal out of loan proceeds or tax credit equity


Sixty days from submission of application to firm commitment, closing thereafter. Pilot applications receive priority

Other Pilot Program Differences

  • Plans and specs may be required based on proposed work scope
  • General contractor not required for some transactions
  • Davis Bacon wages not required unless required by Issuer
  • Construction period may exceed 12 month
  • New 20 year HAP contract if currently Section 8

Changes to Original Policy

  • Seller take-back notes and deferred developer fees are allowed as soft debt without violating 92.5% Rule
  • Gradual pay-in of tax credit equity permitted so long as 20% of LIHTC equity is paid in at closing and remainder is disbursed in pari passu proportions with loan proceeds
  • HUD required completion escrow reduced from 20% to 10% and can be used as a contingency. Can be replaced by similar escrow required by LIHTC investor
  • Tax credit or bond cap allocation no longer required with submission of firm application