FHA Increases Threshold for Large Multifamily Loans to Be Eligible for Standard Underwriting
The Federal Housing Administration on Wednesday increased the threshold at which a multifamily loan is considered a large loan from $75 million to $120 million. The Mortgage Bankers Association commended the move.
FHA published a Mortgagee Letter that announced the change. The agency said it will enable more transactions to use standard underwriting processes when submitted for FHA Multifamily insurance.
FHA also announced it will review the threshold annually, with the possibility of increasing it in $5 million increments if warranted. It noted the changes are designed to simplify underwriting for multifamily housing development without presenting undue risk to FHA and to provide for regular adjustments to the threshold so it does not unduly lag market changes.
“We know that borrowers are contending with the dual challenges of increased development costs and meeting the nation’s dire need for more rental housing,” said Assistant Secretary for Housing and Federal Housing Commissioner Julia Gordon. “Anything we can do to prudently alleviate extra steps in obtaining FHA insurance will help all of us meet the housing supply challenges before us.”
Ethan Handelman, Deputy Assistant Secretary for Multifamily Housing, called revising the threshold an important step for FHA and for the industry. “We want stakeholders to be able to rely on FHA-insured financing for a wide variety of multifamily transactions, and without unnecessary barriers,” he said.
MBA President and CEO Bob Broeksmit, CMB, said the increase to the large loan limit threshold–the first adjustment since 2014–will help facilitate the production of more market-rate and affordable rental housing units at a time when supply is desperately needed in markets across the country.
“MBA has long advocated for this move, citing labor and supply shortages, higher construction costs, and the importance of having loan limits that are consistent with economic conditions,” Broeksmit said. “The increase to the threshold–along with a new method to review it on an annual basis–will help to ensure that HUD multifamily financing is a viable option at all times during the lending cycle.”
Broeksmit thanked HUD Secretary Marcia Fudge, Commissioner Gordon, and the Biden Administration for these changes. “We will continue to work with them, members of Congress, and industry stakeholders on safe and responsible policies that eliminate barriers and increase rental housing supply for all households,” he said.
FHA’s Large Loan policies contained in its Multifamily Accelerated Processing (MAP) Guide (Section 3.10) include additional requirements for underwriting loans for FHA insurance that exceed the threshold for Large Loans. The additional requirements do not apply to loans below the threshold amount. The FHA Mortgagee Letter includes page revisions to the MAP Guide to reflect the new $120 million threshold and the annual review methodology. FHA’s other requirements in the MAP Guide related to Large Loans remain unchanged.
