A recent announcement to lower Mortgage Insurance Premiums (MIP) by the US Department of Housing and Urban Development (HUD) has both lenders and borrowers enthusiastic about the future of multifamily housing. “Ultimately, this directive will make obtaining housing more realistic for those who need it most,” stated Zachary Scardina, Cambridge Realty Capital Vice President of Originations. The initiative, announced in June, takes a two-pronged approach. It eliminates the Green MIP category and it reduces FHA mortgage insurance premiums to 25 basis points for all FHA Multifamily Mortgage loan programs.
Previously, the 25-point premium was only available to properties which met one or more green building standards, and other apartment properties paid a higher MIP. MIP is similar to Private Mortgage Insurance (PMI) in the residential real estate market in that it is an add-on to the interest rate. According to HUD, this directive will “lower costs for borrowers and developers and will help accelerate the supply of affordable housing stock for the American people.” Under the new directive, all FHA Multifamily Mortgage programs will be available at 25 basis points. This includes 223(f), 221(d)(4), 241(a), 223(a)(7) and others.
Scardina believes this move is both noteworthy and significant. “It improves efficiency, minimizes red tape, and opens the door to new development under the HUD umbrella. Eliminating the Green and Energy Efficient MIP category levels the playing field and improves accessibility to critical funding, which ultimately benefits communities and people who need housing the most.” Additionally, this move will significantly enhance the economics of a HUD-insured mortgage compared to other agencies and lenders.
“HUD borrowers can look forward to a simpler borrowing process with fewer obstacles to navigate. Above all and most importantly, those who are feeling the cost-of-living crunch may soon experience some relief in the form of more affordable housing,” Scardina finished.
For more information about the new directive and how it applies to development and borrowing, Scardina urges those who are interested to reach out to Cambridge. “We would be pleased to have a conversation about how this affects you, your properties, and your goals.”
