Despite the looming uncertainty caused by this year’s presidential election, the Federal Housing Administration (FHA) has maintained its focus on affordable housing and introduced several measures to boost economic and housing recovery across the country. By shrinking or even eliminating underwriting queues and introducing the Low-Income Housing Tax Credit (LIHTC) Pilot Program, the agency has streamlined the FHA financing process, fueling a dramatic shift in affordable housing.
Along with traditional 221(d)(4) affordable deals, Love Funding has been working with clients using the newly introduced 223(f) Pilot Program which has now been expanded nationwide. Here are some highlights of the Pilot Program:
- The Program allows for hard costs as high as $40,000 per unit without using Davis Bacon wage rates
- HUD is currently processing multiple deals with the intent of expediting processing within a 90 to 120 day timeframe from the date of submission until close
- Designated HUD underwriters with experience in affordable housing will be assigned these deals and act as the sole reviewer, cutting down HUD’s processing time tremendously.
With interest rates remaining low, this is the ideal loan program for many affordable acquisitions and/or refinances.
Within the last year, Love Funding has worked on traditional 221(d)(4) LIHTC projects, as well as Pilot Program transactions and the newly introduced RAD Program. With a dedicated staff that has years of FHA experience, Love Funding continues to be at the forefront of affordable financing.
Love Funding and HUD remain committed to healthcare, hospitaland market rate multifamily transactions as well. During the last two fiscal years, Love Funding has financed 160 properties totaling $1.6 billion through the various FHA insurance programs.
Client Round Table
Love Funding recently had the opportunity to refinance Edgewood Village Apartments, a project-based Section 8 apartment community in East Lansing, Michigan. The refinance allowed the property’s owner, Edgewood Village Nonprofit Housing Corporation, to add a much-needed community building to host its wide array of educational and training programs for low-income residents and their children, as well as fund a number of energy efficiency upgrades. We recently discussed this unique project with John Duley, president of Edgewood Village Nonprofit Housing Corporation.
Can you tell us a little bit about the history of the property?
The project was started in 1973 by the Edgewood United Church in response to the fact that there wasn’t good housing available for low-income people in the East Lansing-Meridian Township area. Each of the 135 units has a Section 8 certificate attached to it, which stays with the property when tenants move and gives us a basis for making sure the property is used for the purposes for which it was built. Our ownership group took over the property in 1994.
What role does the project play in the local community?
When we took over the property, HUD recommended that there be a computer lab onsite to help create a more level educational playing field for children and create employment opportunities for adults. We added that in 1997. Since then, we have added a two-classroom daycare center that we lease to Head Start for $1 a year. We started a program called “Closing the Digital Gap,” in which we give computers to the parents of Head Start kids upon completion of a training course onsite. We also have a college prep program, a scholarship program in partnership with the Meridian Township Rotary Club, and we work in collaboration with three area churches to staff the a program for township residents who own Bridge Cards, the area equivalent of food stamps.
How did you build on that service platform with this latest refinancing?
Four years ago, the regional manager of our properties pointed out to me that we had so many activities going on at Edgewood Village that we should have a dedicated building to host them. We began working with Love Funding to negotiate with the regional HUD office to build such a building. The property is so efficiently managed that its vacancy rate is among the lowest in HUD’s portfolio, so we had a surplus of reserves to potentially help pay for it. HUD said we would only be able to do that if we could show their architect 50%-completed drawings and identify an architect and a contractor who would build to those plans for the approved cost estimate. We passed all the obstacles and HUD allowed us to use the reserves. So we didn’t end up having to do any outside fund raising. The building should be completed by next spring.
Didn’t you also take this opportunity to make the building more energy efficient?
Yes. HUD asked if we had any plans for future property improvements and we told them of our plans to upgrade the property over the next five years with new furnaces, windows, insulation, and other energy efficiency improvements. They allowed us to add $1 million to the mortgage in escrow, allowing us to upgrade the property in one year instead of five.
Why did you choose Love Funding to finance the loan?
Love Funding has been our mortgage lender since the original transaction in 1994. We have been very pleased with their service. The company took on the major responsibility for negotiating with HUD, which we really weren’t in a position to do. They were very persistent in trying to get the agency to do something they had never done before in allowing us to use the reserves to build an activity center. They really helped us break new ground here.
Would you use Love Funding again for your financing needs?
Oh yes. We have been very pleased with their efforts on our behalf. They have given us a lot of their time and energy over the years, and it has really paid off for us.
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