The Federal Housing Administration (FHA) announced that it is removing temporary COVID-19 underwriting mitigants for multifamily transactions insured under Section 223(f) of the National Housing Act, effective immediately for all insured transactions that have yet to reach endorsement.
The temporary requirements calling for nine months of debt service reserves, 250% repair escrows, and limits on cash-out refinance transactions were originally put in place in April 2020 to counterbalance potential financial effects resulting from the COVID-19 pandemic. In the almost two years following implementation of the policies, the FHA multifamily portfolio has proven to be consistently resilient to significant COVID-19 impacts, remaining at a less than 1% default rate, according to FHA officials.
The announcement was made Monday during the Mortgage Bankers Association Commercial/Multifamily Finance Convention & Expo in San Diego.
“Through actions taken under the Biden-Harris administration to help the nation recover from the pandemic, including the historic American Rescue Plan, mortgages in FHA’s multifamily insurance portfolio experienced fewer challenges than expected,” said Lopa Kolluri, principal deputy assistant secretary for the Department of Housing and Urban Development’s Office of Housing and FHA. “Because of this, we are in a position to unleash multifamily development capital by lifting these underwriting safeguards.”
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