In order to provide liquidity to the marketplace, the Federal Housing Administration has agreed to a six-month suspension of certain rules regarding the insurance of multifamily mortgages.

In a Feb. 6 letter to lenders, FHA Commissioner Brian D. Montgomery provided waiver authority of the Section 223(f) eligibility restriction to properties that have been completed or substantially rehabilitated for less than three years prior to the date of application. Prior to the issuance, the FHA?a part of the U.S. Department of Housing and Urban Development (HUD)?would not insure a loan for the purchase or refinance of a multifamily property built or significantly rehabbed within the past three years.

"The Department is responding to the fact that there are a number of recently constructed or rehabilitated properties in the marketplace which are fully operating and self-sustaining but are now unable to secure permanent long-term financing due to the freeze in the capital markets," said an FHA spokesperson, who requested anonymity.

Suspensions of 223(f) requirements were also issued in 1974 to ease credit constraints and provide market liquidity. Those changes were implemented to address liquidity shortages prevailing in multifamily real estate financing that prevented otherwise sound projects from obtaining permanent financing. "The existing capital market credit freeze is similarly constraining the availability of permanent financing today," the FHA spokesperson said. "The current waiver authority provides relief similar to that provided in 1974, which made available long-term debt to ensure the viability of needed, successfully operating rental housing."

Still, some finance pundits see the current rule suspension as somewhat restrictive as it requires borrowers to have been issued a certificate of occupancy (CO) dated no later than July 31, 2008. "While it will undoubtedly help some borrowers, it feels pretty limited in both time duration and in terms of the certificate requirement" says John Nolde, an attorney specializing in low-income housing tax credits and tax-exempt bonds financing for the real estate practice group of Minneapolis-based law firm Winthrop and Weinstine. "That's a very narrow sweet spot. If they put the CO at Dec. 31, 2008, or extend the suspension for 12 months, or made it permanent, I think you would have a lot of people lining up."

The FHA hasn't necessarily ruled out any of those possibilities. In his letter, Montgomery recognized the more restrictive nature of the suspension and noted that HUD will evaluate the effectiveness of the waiver authority based upon the applications FHA receives and may elect to extend the program based upon that evaluation.