Many borrowers are facing a difficult time finding lenders interested in construction or rehabilitation loans right now. But multi-family owners with a need and desire to rehabilitate their multi-family properties are finding the HUD 221(d)4 program a viable alternative. “We direct clients with moderate levels of rehab into the 223(f) multi-family refinance program first,” commented Gary Unkel, an originator in ValueXpress’ New York office. “You can stay in the 223(f) program if the amount of rehab is less than 15% of post-rehabilitation appraised value or $6,500 per unit (except in high-cost areas), whichever is greatest. Repairs may not include replacing more than one major building system such as plumbing or electric. The reason for staying in the 223(f) program is quicker processing time and lower consulting/professional costs.”
But in the case of substantial rehabilitations, which are defined as projects that include either rehabilitation costs equal to the greater of 15% of post-rehabilitation appraised value or $6,500 per unit (adjusted for applicable high cost factor) or else replacement of two or more major building components, the 221(d)4 program can be very attractive. “We are working on a multi-family deal in Houston, Texas, in which the property that was severely damaged by Hurricane Ike, and the project received less in insurance proceeds than what was required to rebuild the property. The $13-million 221(d)4 loan will include $6 million in renovation funds and the existing lender, a conduit servicer, is going to allow a discounted pay-off to make the project work,” said Michael D. Sneden, Executive Vice President at ValueXpress.