On March 18, the U.S. Department of Housing and Urban Development (HUD) placed into effect the 2020 Multifamily Accelerated Processing (MAP) Guide, which serves as a roadmap for borrowers seeking HUD-FHA insured mortgages for multifamily properties. The 2020 MAP Guide has several key updates from the former MAP Guide issued in 2016 that aim to make HUD loans more accessible to new groups of borrowers.
At Berkadia, our trained and dedicated team of HUD professionals have helped our clients navigate HUD’s requirements and complexities to secure more than $3 billion in overall HUD financing in 2020 and close more than $1 billion in HUD financing to-date this year. As HUD’s pipeline continues to grow and offer services to more and more property owners, it has never been more important to understand HUD’s requirements and, in hand, your entire universe of financing options.
That’s why we’re sharing the top 5 changes from HUD’s 2020 MAP Guide that all property owners should have in mind going forward:
Emphasis on Affordable Housing
Now more than ever, Americans need affordable housing. Everything from the widespread economic uncertainty, to unemployment and business closures resulting from the COVID-19 pandemic, has only further underscored our national need. HUD recognizes this need and has made a number of changes within the 2020 MAP Guide that are more advantageous for affordable transactions, both LIHTC and those covered by a HAP contract. These changes include: increased use of equity bridge loans at closing, longer terms for equity bridge loans, waiver of Working Capital escrows for certain deals, delayed funding of the Operating Deficit Escrow, and payment of Deferred Developer Fee from unused escrows.
Inclusion of the 3-Year Rule Waiver
The MAP Guide’s 3-Year Rule Waiver, which incorporates guidance from early 2020, enables recently constructed or rehabilitated buildings to be eligible for refinance, generously, after only one month of required debt coverage. This improvement allows HUD 223f loans, for the first time, to serve as construction takeout loans for brand new stabilized properties.
Increased Emphasis on “Going Green”
The 2020 MAP Guide has added an energy and water conservation chapter. From this, HUD now offers guidance on how certain applications can proceed through the Green MIP process, especially as it has discontinued ENERGY STAR certification for existing properties built more than three years ago. Other updates include guidance regarding asbestos, radon, and fracking. Moving forward, all new construction property owners should work closely with their Berkadia advisor as early as possible to determine the most advantageous design to allow the project to realize the greatest advantage of the environmental savings offered by HUD.
Elimination of Value Lookbacks
In the 2016 MAP Guide, value limitations were in place for properties or land that were purchased within three years from the loan application. Under the new Guide, these value limitations have been eliminated, and instead, the standard is now market value as supported by appraisal. This is a critical shift as property values have been increasing rapidly in certain markets, and we anticipate this upward trajectory to continue, particularly in secondary and tertiary cities across the country .
Pivoting to Virtual Closings
It is no secret that almost overnight our entire nation moved entirely to remote work, making a strong need for virtual accessibility. As a result, the new Guide allows for closings by mail, unless deal complexity warrants an in-person closing, and the electronic submission of closing files. This makes the closing process—even once everything is back to “normal”—much more convenient and largely without the need for travel.
To learn more about the 2020 MAP Guide and what it could mean for you, check out this recording of Berkadia’s recent webinar on the Guide and this information sheet.
–Steve Ervin, Senior Vice President and Head of FHA and Seniors Housing Finance