FHA to cut insurance rates on multifamily mortgages


WASHINGTON – Jan. 29, 2016 – The Federal Housing Administration (FHA) announced a multifamily insurance rate reduction designed to encourage capital financing of affordable and energy-efficient apartments. The rate reductions take effect on April 1, 2016, and directly impact FHA's Multifamily Housing Programs and properties housing low- and moderate-income families and/or developments that install energy-efficient systems or build within federal energy guidelines.

FHA's new multifamily insurance rates are available online.

HUD Secretary Julián Castro announced the changes during a visit to an affordable housing complex in Columbus, Ohio. FHA estimates that multifamily insurance rate reductions will spur the rehabilitation of an additional 12,000 units of affordable housing per year nationally. If so, it says nearly 40,000 families could benefit over the next three years.

"Families across the country are struggling through an affordable housing crisis," said Secretary Castro. "By reducing our rates, this Administration is taking a significant step to encourage the preservation and development of affordable and energy efficient housing in communities large and small. This way, hard-working families won't have to make the false choice between quality or affordable housing."

FHA's new annual multifamily insurance rates include:

  • For 'broadly affordable' housing (at least 90 percent of the units are under Section 8 contract and/or covered by Low Income Housing Tax Credit (LIHTC) affordability requirements), FHA is lowering annual rates to 25 basis points, a reduction of 20 or 25 basis points from current rates.
  • For affordable mixed-income properties – properties that set-aside units based on affordability including partial LIHTC, partial section 8, inclusionary zoning, or other local affordability requirements ­– FHA is lowering annual rates to 35 basis points, a reduction of 10 to 35 basis points from current rates.
  • For energy-efficient properties (those committed to industry-recognized green building standards, AND committed to energy performance in the top 25 percent of multifamily buildings nationwide), FHA is lowering annual rates to 25 basis points, a reduction of 20 to 45 basis points. Qualification for the top 25 percent will be determined using EPA's portfolio manager 1-100 score.
  • To ensure that the broadly affordable and energy-efficient properties benefit directly from the lower rates, FHA will limit the fees that can be charged on these loans.
  • Multifamily insurance rates for market-rate properties that are not energy efficient (as defined above) remain unchanged.

FHA is also reducing upfront premiums to support the affordable housing and energy efficiency goals. Upfront insurance rates will be set at 25 basis points for broadly affordable and energy-efficient properties and 35 basis points for mixed-income properties. Upfront premiums for market rate properties that are not energy-efficient remain unchanged.

© 2016 Florida Realtors®

Reprinted with permission. Florida Realtors®. All rights reserved.

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