Mortgage Insurance_Cooperative Projects

Enables nonprofit cooperative ownership housing corporations or trusts to develop or sponsor the development of housing projects to be operated as cooperatives.

Section 213 allows investors to provide good quality multifamily housing to be sold to such nonprofit corporations or trusts upon completion
of construction or rehabilitation.

Agency - Department of Housing and Urban Development

The Department of Housing and Urban Development's mission is to increase homeownership, support community development and increase access to affordable housing free from discrimination. HUD fulfills this mission through high ethical standards, management and accountability, and by forming partnerships with community organizations.

Office - Persons are encouraged to communicate with the Multifamily Hub or Program Center with jurisdiction for the proposed property.

HUD Multifamily Hubs and Program Centers are listed on the web at http://www.hud.gov/offices/hsg/mfh/mfbroch/hubs_pcs.cfm.


Program Accomplishments

In fiscal year 2007, HUD insured mortgages for seven projects with 373 units, totaling $33 million. It is estimated that the Department will insure approximately the same number of projects in fiscal year 2008.

Uses and Use Restrictions

Section 213 insures lenders against loss on mortgages.

Insured mortgages may be used to finance construction, acquisition of existing, or rehabilitation of detached, semidetached, row, walk-up, or elevator type housing consisting of five or more units.

The program has statutory per unit mortgage limits which vary according to the size of the unit, the type of structure, and the location of the project.

There are also loan-to-replacement cost and debt service limitations.

Contractors for new construction and substantial rehabilitation housing projects must comply with prevailing wage requirements under the Davis-Bacon Act.

Eligibility Requirements

Applicant Eligibility

Eligible mortgagors are nonprofit cooperatives, ownership housing corporations or trusts which may either sponsor projects directly, sell individual units to cooperative members, or purchase projects from investor-sponsors (builders, developers, or others who meet HUD requirements).

Beneficiary Eligibility

Members of the cooperative are eligible to occupy a dwelling in the structure whose mortgage is insured under the program.

Credentials/Documentation

Documentation regarding the characteristics of the property and the qualifications of the mortgagor are assembled by the mortgagee and submitted with the application. This program is excluded from coverage under OMB Circular No. A-87.

Aplication and Award Process

Preapplication Coordination

The sponsor has an initial conference with the local HUD Multifamily Hub or Program Center to determine the preliminary feasibility of the project before a site appraisal and market analysis (SAMA) application (for new construction projects) or a feasibility application (for substantial rehabilitation projects) is submitted.

This program is excluded from coverage under OMB Circular No.

A-102.

An environmental assessment is required for this program.

This program is eligible for coverage under E.O.

12372, "Intergovernmental Review of Federal Programs." An applicant should consult the office or official designated as the single point of contact for additional information on the process the State requires to be followed in applying for assistance, if the State has selected the program for review.

Application Procedures

The sponsor submits the SAMA application or feasibility letter to the local Hub or Program Center. Following HUD's approval and issuance of a SAMA or feasibility letter, the sponsor submits a firm commitment application through a HUD-approved mortgagee to the local Multifamily Hub or Program Center for processing. This program is excluded from coverage under OMB Circular No. A-110.

Award Procedures

The local HUD field office decides whether to approve, or reject individual applications and whether to issue a commitment to the lender to insure the mortgage.

Deadlines

Deadlines are established on a case-by-case basis by the local HUD Multifamily Hub or Program Center.

Authorization

National Housing Act, as amended, Section 213; Housing Act of 1950, Public Law 81-475; Housing Act of 1956, Public Law 84-1020, 12 U.S.C. 1715(e); Public Law 91-152, 83 Stat. 379, 383; Public Law 84-345, 69 Stat. 635; Public Law 87-70, 75 Stat. 149, 179; Public Law 86-372, 73 Stat. 654, 656; Public Law 89-117, 79 Stat. 451, 469; Public Law 89-754, 80 Stat. 1255-66.

Range of Approval/Disapproval Time

Processing times will depend upon the degree of preparation by the sponsor and HUD Multifamily Hub or Program Center workload.

Appeals

If any application for mortgage insurance is denied, HUD will state the reasons for the denial. If reapplication is desired, the applicant may modify the application and reapply.

Renewals

The term of a commitment to insure may be extended when more time is required.

Assistance Considerations

Formula and Matching Requirements

Sales-Type: The maximum loan for the sales project is the amount equivalent to the aggregate total of the maximum mortgage amounts that would be allowed for the individual units comprising the project under Section 203(b) Program 14.117 - of the National Housing Act. Investor-Sponsor: The maximum amount of the loan to the investor sponsor is equal to 90 percent of the estimated replacement cost. Management-Type: The maximum amount of the loan is equal to 98 percent of the estimated replacement cost. All Projects: The annual mortgage insurance premium is one half percent of the mortgage amount. The combined FHA application and commitment fees are $3 per $1,000 of the mortgage amount. The HUD inspection fee may not exceed $5 per $1,000 of the mortgage amount.

Length and Time Phasing of Assistance

The maximum mortgage term is 40 years, or not in excess of three-fourths of the remaining economic life, whichever is less, except for sales type cooperatives where the maximum term is 35 years or not in excess of three-fourths of the remaining economic life, whichever is less.

Post Assistance Requirements

Reports

Defaults in meeting the mortgage terms must be reported.

All approved mortgagees at any time upon request by HUD must furnish a copy of their latest financial statement.

Audits

The Department of Housing and Urban Development reserves the right to audit the accounts of either the mortgagee or mortgagor in order to determine their compliance and conformance with the regulations and standards.

Records

Mortgagees are required to service and maintain records in accordance with acceptable lending practices of prudent lending institutions and HUD regulations.

Financial Information

Account Identification

86-4587-0-3-371.

Obigations

Reported under program 14.117.

Range and Average of Financial Assistance

Loan sizes ranged from $1,500,000 to $10,200,000, with an average of $4.7 million. Project sizes ranged from 22 units to 120 units with an average of 53 units.

Regulations, Guidelines, and Literature

HUD Handbooks 4550.1 and 4550.2 "Basic Cooperative Housing Insurance, and Pre-sale Management Type Co-ops", no charge; HUD Handbook 4550.3, "Converting an Existing Project to a Cooperative", no charge; HUD Handbook 4240.3, Section 203 (n), Application Through Insurance (Single Family), no charge; HUD Handbook 4550.4, Supplementary Loan-Cooperative Housing", no charge; HUD Handbook 4550.5, "Investor-Sponsor and Nonprofit Sponsorship of Housing Cooperatives", no charge; HUD Handbook 4550.6, "Sales Type Cooperatives", no charge available on http://www.hudclips.org.

Information Contacts

Regional or Local Office

Persons are encouraged to communicate with the Multifamily Hub or Program Center with jurisdiction for the proposed property. HUD Multifamily Hubs and Program Centers are listed on the web at http://www.hud.gov/offices/hsg/mfh/mfbroch/hubs_pcs.cfm.

Headquarters Office

Office of Multifamily Housing Development, Department of Housing and Urban Development, 451 7th Street, S.W., Washington, DC 20410. Telephone: (202)708-1142. Use the same number for FTS.

Criteria for Selecting Proposals

Not applicable.



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