FHA HUD 223(a)(7) Multifamily Loan Program

The FHA HUD 223(a)(7) loan product is used by multifamily and healthcare investors with current HUD loans who are looking to refinance their debt. There are a variety of different reasons for an investor to refinance a current HUD loan into a new one. In low interest rate environments, many borrowers want to refinance into lower rates to increase cash flow. Additionally, some borrowers look to the HUD 223(a)(7) loan to increase their loan amortization schedule. This product is very favorable in HUD’s eyes because both lower interest rates and longer amortizations mean more cash flow and more cash flow means there is a lower chance the borrower defaults on the loan. One of the best factors of this product is that HUD will allow the prepayment penalty to be rolled into the new loan.

This program takes much faster to close than the other HUD multifamily loan programs. Why is that? Because the borrower already has a HUD loan, HUD knows the property and is comfortable with the borrower already. The result is that HUD doesn’t require any new appraisals, environmental or market reports. All they require is a new Project Capital Needs Assessment. The HUD 223(a)(7) multifamily loan only takes a couple of months to close- much faster closing timeline than the other HUD loan programs. In addition, this loan program is much cheaper than other HUD loan programs. HUD only collects an initial application fee of 0.3% and they refund half of that fee to the borrower at closing!

FHA HUD 223(a)(7) Multifamily Loan Program Loan Program Terms and Guidelines

Eligible Properties
Nationwide multifamily and healthcare properties that have current HUD debt

Loan Amount
Cash out is not allowed. Loan is maximum of 100% of transaction costs. Transaction costs include current principal amount, any fees, reserves deposit, third party reports and prepayment penalty.

Loan Term
The loan may be extended by up to 12 years. However, the new loan term cannot be more than the initial loan term. For HUD 221(d)(4) loans- this is a maximum of 40 years. For HUD 223(f) loans, terms are capped at 35 years.

Prepayment penalty
Various different options.

Loan Assumption
Loans are assumable subject to HUD approval and a fee of .05% of initial HUD note

Recourse
Loan is non-recourse with standard “bad-boy” carveouts

Timing
About 60 days