FHA Apartment Loan Proposed Underwriting Changes

FHA Bombshell: We're Tightening Our Underwriting - Debt, Lenders, Government Entities - Multifamily Executive Magazine:

"FHA wants to raise the debt service coverage ratio (DSCR) for the popular Sec. 221(d)(4) program"

"under the proposed changes, market-rate deals seeking 221(d)(4) loans would be underwritten to a minimum 1.20x DSCR. Projects with subsidy levels of 95 percent or greater will still enjoy a 1.11x DSCR, but low-income tax credit deals would be bumped up to a minimum 1.15x."

For FHA 223(f): "Tax-credit deals and HAP-contract deals will stay at the program’s current level of 1.1765x DSCR, but market-rate deals will be bumped up to 1.20x."

"The changes will be open for public comment once they are published on the Federal Register. And judging by the initial reaction of FHA lenders, there will be quite a debate between industry lobbying groups and the agency. The Mortgage Bankers Association is still studying the impact of the changes and gathering additional information on the rationale behind them, before it takes an official position."

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