Mortgages Insurance for Single Room Occupancy (SRO) Projects

The Single Room Occupancy (SRO) Program provides mortgage insurance for multifamily properties consisting of single-room units.

There are no Federal rent subsidies involved with this SRO Program.

It is aimed at those tenants who have a source of income but are priced out of the rental apartment
market.

SRO projects will generally require assistance from local governing bodies or charitable organizations in order to reduce the rents to affordable levels.

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 nearest local HUD Multifamily Hub and Program Center listed in http://www.hud.gov/offices/hsg/mfh/mfbroch/hubs_pcs.cfm or the nearestHUD Office listed in the Catalog Address Appendix IV.


Program Accomplishments

In Fiscal Year 2007, the Department did not insure any mortgages under this section. No activity under this section is expected in Fiscal Year 2008.

Uses and Use Restrictions

The SRO Program insures lenders against loss on mortgages used to finance construction or substantial rehabilitation of projects consisting of five or more units comprised primarily of one room residential units.

Projects must be designed primarily for residential use.

Any commercial activity must be compatible with the use of the project and primarily for the benefit of the residents.

Commercial space is limited to 10 percent of the total gross floor area (20 percent in substantial rehabilitation projects), and 15 percent of gross rental income in a project.

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

Eligibility Requirements

Applicant Eligibility

Eligible applicants may be nonprofit entities; builder/sellers teamed with a nonprofit purchaser, a limited distribution entity, profit-motivated entities or public entities.

Cooperative lenders or investors are not eligible.

Beneficiary Eligibility

Residents are subject to normal tenant selection procedures. There are no income limits for admission.

Credentials/Documentation

Along with the Application for Mortgage Insurance, the applicant must provide a market profile demonstrating a clear need for the proposed SRO, experience profiles as to SRO operation, a certification from the local government assuring support of the project, and a relocation plan if needed.

Aplication and Award Process

Preapplication Coordination

For Traditional Application Process (TAP), the sponsor has an initial conference with the local HUD Multifamily Hub and Program Center to determine the preliminary feasibility of the project before a Site Appraisal and Market Analysis (SAMA) Application (for new construction projects or feasibility application (for substantial rehabilitation projects) is submitted.

For Multifamily Accelerated Processing (MAP), the sponsor works with the MAP-approved lender who submits required exhibits for the pre-application state.

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

Award Procedures

The project is reviewed to determine its feasibility. If the project meets program requirements, the HUD Multifamily Hub or Program Center issues a commitment 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, Section 221(d), 12 U.S.C. 1751(d); Section 223(g), 12 U.S.C. 1715 (g).

Range of Approval/Disapproval Time

Processing time depends upon the degree of preparation by the sponsor and the workload of the HUD Multifamily Hub or Program Center.

Appeals

If an application for mortgage insurance is denied, HUD will state the reasons for the denial. If reapplication is desired, the applicant may reapply subject to concurrence of the lender.

Renewals

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

Assistance Considerations

Formula and Matching Requirements

The maximum amount of a Section 221 (d)(4) profit motivated loan may not exceed 90 percent of the estimated replacement cost. The maximum amount of a Section 221(d)(3) non-profit loan is 100 percent of the estimated replacement cost. The mortgage insurance premium is one-half percent of the mortgage amount. The HUD fees for application processing and commitment 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.

Post Assistance Requirements

Reports

HUD must approve mortgagor changes during the period of mortgage insurance.

Defaults in meeting the mortgage terms must be reported.

All mortgagors are required to submit an annual financial statement to HUD.

All approved mortgagees at any time upon request by HUD must furnish copies of their latest financial statements.

Audits

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

Records

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

Financial Information

Account Identification

86-4077-0-3-371.

Obigations

(Mortgages insured) Reported under program 14.133.

Range and Average of Financial Assistance

The maximum amount of the loan may not exceed 90 percent of the estimated replacement cost for For Section 221(d)(4). The maximum loan amount for Section 221(d)(3) is 100 percent of the estimated replacement cost.

Regulations, Guidelines, and Literature

24 CFR 221.565; HUD Handbook 4560.3, Mortgage Insurance for Single Room Occupancy (SRO) Projects available on www.hudclips.org.

Information Contacts

Regional or Local Office

Persons are encouraged to communicate with the nearest local HUD Multifamily Hub and Program Center listed in http://www.hud.gov/offices/hsg/mfh/mfbroch/hubs_pcs.cfm or the nearestHUD Office listed in the Catalog Address Appendix IV.

Headquarters Office

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

Criteria for Selecting Proposals

Not applicable.



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