U.S. Department of Housing and Urban Development Washington, D.C. 20410-8000

OFFICE OF HOUSING

SECTION 223(f)/SECTION 221(d)(4)

The Federal Housing Administration (FHA) has implemented new mortgage insurance processing procedures for small multifamily rental properties with a minimum of 5 units.

SMALL PROJECT PROCESSING (SPP)

• focuses on an underserved market with unique problems in loan origination and finance
• permits faster, more flexible processing by lenders and FHA
• is available for new construction, substantial rehabilitation and purchase/refinance of existing properties

SPP delegates processing functions normally performed by FHA to approved lenders. FHA will review underwriting recommendations, issue firm commitments and endorse mortgages for insurance

SPP CHARACTERISTICS:

• maximum insured mortgage amount up to $1 million
• fully amortizing, fixed rate mortgages for up to 35 years for new construction and substantial rehabilitation 30 years for purchase or refinance of existing properties
• insurance of advances as well as insurance upon completion for 221(d)(4)
• loan to value ratios of up to 80% for the purchase or refinance of existing properties and up to 85% for new construction and substantial rehabilitation
• fees and premiums similar to regular 221(d)(4) and 223(f) programs, except that lenders may charge reasonable and customary origination and financing fees up to 5.5%
• lenders must be FHA approved mortgagees and SPP approved
• eligible for new Government National Mortgage Association mortgage-backed securities program

The Government National Mortgage Association (GNMA) has developed a mortgage-backed securities program which will enable GNMA approved seller - servicers to pool mortgages insured under the SPP. This will enable lenders in the small projects market to increase their volume of small project lending.

For further information on SPP, call the Office of Business Products of HUD's Multifamily Housing Programs Office at (202) 708-3000.