8.10.1 Mortgage Amounts and Cash Requirements

• A. Firm Commitment Processing .

1. For new construction, the insurable loan amount is the lowest of four criteria on form HUD-92264-A, Supplement to Project Analysis: the application amount, the cost amount, the statutory limits amount, and the debt service amount, which are described below. Refer to Appendix 3, Section A.3.1 for the applicable program’s required maximum loan ratios and the debt service coverage ratios needed to complete criteria for Firm applications for new construction and substantial rehabilitation:

The Application amount.

• The Amount Based on Value or Replacement Cost. The result of Lender's estimate of the replacement cost after completion, multiplied by the applicable program percentage.

The Amount Based on Limitations Per Family Unit - Statutory Limits:

• 1. The Statutory limits are determined by an amount attributable to per unit limitation type as adjusted by the High Cost Percentage (HCP) and dwelling use (excluding land).
• 2. Record the sum of costs not attributable to dwelling use from Section M Line 15, form HUD92264 into Criterion Line 4.b. Insert the same program percentage loan-to-cost ratio noted in A.1 above in the percentage space in Line 4.b. Multiply the sum of costs not attributable with the percentage loan-to-cost ratio and record the sum.
• 3. On Line 4.c. insert the full value of the “ warranted price of the land ” (see Section G Line 73a, form HUD-92264) or the full amount of the “As Is” value of the Land Without the Improvements (strike through “warranted price of the land” and insert “As Is Value”) if the transaction is a substantial rehabilitation loan (see Section H Remarks Section, form HUD92264).
• 4. On Line 4.e. total costs not attributable multiplied by the percentage of the loan-to-cost ratio, plus (added to) the maximum statutory limit calculated for the number of each by-unit-type. The sum calculated is the criterion mortgage amount. Strike a line through Line 4.e “ Total Number of Spaces” field or leave blank, this field is no longer applicable.
• 5. For the latest High Cost Percentages visit the HUD web site at:

http://portal.hud.gov/hudportal/HUD?src=/program_offices/housing/mfh/mfinfo .

• Amount Based on Debt Service Limit. The loan amount supported by the applicable percentage of the projects’ estimated net income. The NOI used to support this mortgage criterion may be split into two or more income streams, for example to capitalize the savings from tax abatement or to recognize other revenue sources such as from an IRP decoupling or the difference between market rents and HAP contract rents.

  • 1. That portion of the maximum mortgage supported by the tax abatement or other source must be amortized over the same period as the additional NOI is available.

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Chapter 8 Mortgage Credit 8.10 Commitment Processing 220, 221(d), 231, 241(a)

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• 2. In order to be recognized in the mortgage proceeds, any tax abatement must run with the real estate and not with the type of sponsorship.

2. Substantial Rehabilitation Loan Limits. Amount of Loan Rehabilitation under Section 220 and 221(d). (This includes only projects involving substantial rehabilitation.) The insurable loan amount is the lowest of four criteria on form HUD-92264-A, Supplement to Project Analysis: the application amount, the cost amount, the statutory limits amount or the debt service amount, as described below. Refer to Chapter 3 for the applicable program required maximum loan ratios and the debt service coverage ratios needed to complete the criteria for substantial rehabilitation Firm Commitment applications.

   • The Application amounts.

• The Lender’s estimate of the rehabilitation cost plus the “as is” value of the land and existing improvements before rehabilitation, multiplied by the applicable percentages in Chapter 3.

• Amount of Loan – Rehabilitation under Section 231. (Only for projects involving substantial rehabilitation.) The amount as permitted under the new construction program except the loan limitation is based on the estimate of value rather than the replacement cost. The insurable amount is the lowest of:

  • 1. The application amounts.
  • 2. Property owned – 100% of the estimated cost of rehabilitation plus the lesser of:

    • a) Principal amount of existing indebtedness against the property and closing charges, or

    • b) For all Borrowers, apply the amounts in Chapter 3, to calculate the Lender’s estimated appraised value of the property before rehabilitation and closing charges less:

      • i. Value of leased fee, if leasehold, and/or

      • ii. Principal amount of special assessment

  • 3. Property to be acquired – For all Borrowers apply the amounts in Chapter 3 to calculate the Lender’s estimated current cost of rehabilitation/reconstruction plus the lesser of:

    • a) Apply the amounts in Chapter 3 for all Borrowers to calculate the actual purchase price of the property and closing charges, or

    • b) For-profit Borrowers apply the amounts in Chapter 3, of the Lender’s estimated appraised value of the property before rehabilitation and closing charges and/or principal amount of special assessment.

• B. Insurance of Advances and Related Matters. See Chapter 12, Section 12.7 and Appendix 12 for processing instructions.

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Chapter 8 Mortgage Credit 8.11 Sections 223(a)(7) and 223(f) Firm Commitment Processing

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