The FHA 223(f) multifamily loan program is proving to be a savior for apartment owners facing loan maturities in 2010. The program is particularly suited for apartment properties that are slightly overleveraged based on today’s standards. “The 223(f) apartment loan program delivers 20% more loan proceeds than any other multifamily loan program available today,” explained Michael Sneden, Executive Vice President of ValueXpress. “We have a client with a $7.5-million multifamily loan written ten years ago with a 7.5% interest rate that is operating with a 1.10 debt-service coverage ratio who was offered no more than $6.5 million to refinance the loan. Using the FHA 223(f) multifamily refinance program, we easily achieved $7.75 million in proceeds under the program guidelines of 85% LTV and 1.18 debt-service coverage to repay the existing loan and finance all the transaction costs,” he said. “In addition, since the program features a 35-year term and amortization in combination with a interest rate of approximately 5.5%, the cash flow to the borrower increased by $150,000 per year.”
“The key to a successful 223(f) transaction is an early start,” Sneden said. “The processing time for a 223(f) is longer than for a traditional multifamily loan, often as long as 6 months start-to-close. Since we have access to data on all CMBS conduit multifamily loans that are maturing in 2010 and 2011, we are contacting those borrowers to get them started and processed now so they can close as soon as the loans are open to prepayment without penalty.”