HUD Extends Waiver of Three-Year Rule for Section 223(f) Program
Section 223(f) insures mortgage loans to facilitate the purchase or refinancing of existing multifamily rental housing. These projects may have been financed originally with conventional or FHA-insured mortgages.
HUD recently released Mortgagee Letter (ML) 2013–31, which extends certain provisions within a previously released ML 2012-13 and ML 2011-13. The authority within ML 2011-13 allowed Multifamily HUD Hubs to process waiver requests pertaining to the three-year rule for Section 223(f) applications, but that rule expired in July 2012 and ML 2012-13 extended the rule for one year. This new notice extends the authority for Hub Directors to waive the three-year rule for the Section 223(f) affordable multifamily housing transactions for an additional year. HUD anticipates that this will be the final extension of the three-year rule waiver. All other conditions and requirements of Mortgagee Letter 2102-13 remain unchanged.
The rule applies to both refinances and acquisitions, but not for market-rate properties. The term “affordable” refers to any properties receiving Project-Based Section 8 through either a Housing Assistance Payment (HAP) contract or a Project-Based Section 8 voucher, for greater than 90 percent of the units, or those that are supported by Low-Income Housing Tax Credits (LIHTC). The rule essentially benefits all Section 223(f) applicants that otherwise meet all requirements of the programs except for the rule that the housing was originally completed or substantially rehabilitated less than three years prior to the date of application for firm commitment. Certain other rules, certifications, and requirements may apply.