Across the country, the shift to rental housing is in full swing. The Census Bureau reported in April that the U.S. homeownership rate fell to its lowest level since 1997, as a weak economy and the foreclosure crisis prompted more Americans to rent rather than buy their primary residence. Despite the increase in rental demand, commercial developers and existing multifamily property owners still report having difficulty obtaining credit for new construction, acquisitions and refinancing.
It is little wonder, then, that the U.S. Department of Housing and Urban Development is getting involved in more and more of these deals. In fact, in the fiscal year that ended in September 2011, HUD’s multifamily program office issued $13 billion in firm commitments, up from $11.9 billion in fiscal 2010 and $5.9 billion in fiscal 2009. (It is important to note that HUD does not make the loans; it insures loans that are made by its approved lenders against losses.)
And yet, as I travel the country and meet with commercial developers, I continue to hear them express confusion or uncertainty about HUD’s multifamily programs. In most cases, misinformation about HUD’s role in the sector or about its loan insurance programs has convinced developers to stick it out and wait for private creditors to come around rather than apply for a low-rate HUD-insured loan.
In my experience, their hesitation about HUD stems from three common myths about its multifamily loan programs…
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