Marie Head has been at the helm of the FHA’s multifamily division since November, and she hasn’t even stopped to decorate her office walls.
In the three months since Head replaced Carol Galante as deputy assistant secretary of multifamily housing programs, she has already helped streamline the FHA’s delivery system through new regulations, while issuing new parameters around large loans.
Turns out, she was just getting started. Her latest move is ushering in the long-awaited Tax Credit Pilot Program, mandated by the 2008 Housing and Economic Recovery Act.
The pilot program aims to drastically speed up the processing time of FHA-backed deals that use low-income housing tax credits (LIHTCs). In the past, LIHTC developers had difficulty using the FHA—the LIHTC program carries strict deadlines, and affordable housing owners and developers just couldn’t wait around for the FHA’s notoriously slow turnaround times.
This new program aims to fix all that. “Expediting our delivery system is a big agenda for us,” says Head. “And it’s one of my biggest priorities.”
The pilot program will start out in four markets—Chicago, Detroit, Boston and Los Angeles—and will focus exclusively on Sec. 223(f) deals from about a dozen different lenders. Head believes that the FHA can cut the time it needs to review and approve LIHTC deals using Sec. 223(f) from about one year to a few months.
And Head hopes to add more markets, lenders, and programs—such as the Sec. 221(d)(4) program for construction or substantial rehabilitation deals— after the program proves itself. “There are a lot of preservation opportunities out there right now, and we wanted to get those in first,” says Head. “But discussions about the d4 program, about new construction, are going on in the background.”
In ushering in the pilot program, HUD is also opening up the 223(f) program to higher per-unit amounts of rehab costs. The pilot program will permit much higher amounts—up to $40,000-per unit of hard costs—than the Sec. 223(f) program allowed previously. In the past, developers looking to do such substantial rehabs would be sent to the Sec. 221(d)(4) program, which takes much longer to process. In fact, (d)(4) deals are taking up to 15 months to close these days, Head says.
The pilot will start small—the maximum loan amounts under the pilot program are $25 million. Each of the four offices in the program will designate one staff person to serve as the designated underwriter, and a designated point of contact will be appointed at the FHA’s headquarters to coordinate the pilot program.
“We’ve cut some of the documents that have to be submitted, and we have one single point of contact to process the loan, rather than the loan package being broken down into different technical disciplines within the hubs,” says Head. “We want to be able to make underwriting decisions on these loans, and not be stuck in the muck on technical aspects.”