3.2.14 Builder and Sponsor Profit and Risk Allowance (BSPRA)

A. BSPRA and SPRA are allowed (but not required) for new construction and substantial rehabilitation applications under Sections 221(d)(4) and 220 for profit motivated and limited distribution Borrowers. BSPRA and SPRA are allowed for new construction Section 231 applications but not under Section 231 substantial rehabilitation. Non-profit Borrowers are eligible for a Developer’s fee, or they may apply as a for-profit entity for purposes of applying for FHA mortgage insurance, as provided in Chapter 8.

1. The BSPRA allowance will be credited against the Borrower’s required equity contribution. To use BSPRA, there must be an identity of interest between the Borrower and General Contractor and there must be no paid builder’s profit contained in the mortgage calculation. For new construction, BSPRA is 10% of the estimated cost of: on site improvements, structures, general requirements, general overhead, Architect's fees, carrying charges and financing, legal, organizational (including third party report fees), and audit expenses (total of lines 50, 63 and 67 in Section G. of form HUD-92264), exclusive of land. For substantial rehabilitation projects, BSPRA is 10% of the above costs exclusive of the as is value of the existing structure.

2. SPRA may be included in replacement cost where no identity of interest exists between the General Contractor and Borrower, or where there is an Identity of Interest, but the Borrower and General Contractor have agreed to a General Contractor profit instead of BSPRA. SPRA is 10% of the total estimated cost of: Architect's fees, carrying and financing charges, legal, organizational, and audit expenses.