HUD opens a 30-day lane for FHA construction loans on tax-credit apartments

The mortgagee letter took effect immediately and drops several limits from HUD's 2019 tax-credit pilot. Projects no longer have to stay under 200 units. New construction financed with 4% credits and tax-exempt bonds now qualifies, along with 9% deals. The loan-to-cost cap goes back to the standard 80%, up from 65% to 75% under the pilot, and developers no longer have to defer at least 25% of their fee. HUD's loan sizing and underwriting rules stay the same, the letter says.

The letter also sets a bar for the rest of the team. The general contractor needs at least five completed 221(d)(4) and tax-credit projects in the past 10 years, five Davis-Bacon jobs in the same period and working capital above HUD's 5% standard without help from a parent company. The architect must have designed and supervised five 221(d)(4) projects in 10 years. Developer principals need three tax-credit deals placed in service and stabilized in five years, plus $1 million in liquidity and $5 million in net worth.

Final drawings, specifications and the outside architecture, engineering and cost reviews can reach HUD 15 days before closing instead of before the firm commitment. HUD will require only 10% of the tax credit equity to be paid in at initial endorsement. Deals that carry Section 8 rent subsidies tied to the project do not qualify, and neither do sites with noise above 75 decibels or contamination without an approved cleanup plan.

Frank Cassidy, a former FHA commissioner now at Walker & Dunlop, told Multifamily Dive the lane copies a 2025 express track for senior care facilities, where he said commitments have come in two to three days. HUD calls the lane a test and says it will use feedback to adjust it. How fast regional offices clear tax-credit deals in practice is not yet known.