Content provided by the Catalog of Federal Domestic Assistance
14.188 Housing Finance Agencies (HFA) Risk Sharing
HOUSING, DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT
Housing and Community Development Act of 1992, Section 542(c), Public Law 102-550, 12 U.S.C. 1707. HUD's fiscal year 2001 Appropriations Bill amended Section 235 of the Housing and Community Development Act of 1992 to extend the 542 Risk Sharing Program to a permanent multifamily mortgage insurance program.
Under this program, HUD provides credit enhancement for mortgages for multifamily housing projects whose loans are underwritten, processed, serviced, and disposed of by Housing Finance Agencies (HFA). HUD and the Housing Finance Agencies share in the risk of the mortgage. The program was originally designed as a pilot program to assess the feasibility of risk-sharing partnerships between HUD and qualified State and local HFAs in providing affordable housing for the Nation.
TYPES OF ASSISTANCE:
USES AND USE RESTRICTIONS:
Participating qualified State and local Housing Finance Agencies (HFAs) may underwrite, originate, service, and dispose of properties financed under Section 542(c). Program provides full HUD mortgage insurance to enhance HFA bonds to investment grade. HFA reimburses HUD in the event of a claim pursuant to terms of Risk Sharing Agreement. HFAs may elect to share risk with HUD from 10 to 90 percent of the loss. The program provides new independent insurance authority not under the National Housing Act.
Applicant Eligibility: Eligible mortgagors, who include investors, builders, developers, public entities, and private nonprofit corporations or associations, may apply to a qualified HFA. To be eligible for HUD's approval, the HFA must: (1) carry the designation of "top tier" or its equivalent as evaluated by Standard and Poors or another nationally recognized rating agency; (2) receive an overall rating of "A" for the HFA for its general obligation bonds from a nationally recognized rating agency; or (3) otherwise demonstrate its capacity as a sound, well-managed agency that is experienced in financing multifamily housing.
Pre-application Coordination: To obtain mortgage insurance an applicant should consult the HFA as the single point of contact for more information on the process. The sponsor will have a preapplication meeting with the HFA. This program is excluded for coverage under E.O. 12372.
Formula and Matching Requirements: The program is a pilot designed to assess the feasibility of risk-sharing partnerships between HUD and other financial agencies.
POST ASSISTANCE REQUIREMENTS:
Reports: Any change of the mortgagor during the period of mortgage insurance must be approved by the HFA. Defaults in meeting the mortgage terms must be reported. All mortgagors are required to submit an annual financial statement to the HFA.
Account Identification: 86-4077-0-3-371.
In fiscal year 2001, HUD insured mortgages for 81 projects with 9,061 units, totaling $451 million. The Department expects to insure a similar number of mortgages in fiscal year 2002.
REGULATIONS, GUIDELINES, AND LITERATURE:
The regulatory authority for this pilot program is regulation, 24 CFR Part 266.
Regional or Local Office: See Regional Agency Offices. Persons are encouraged to communicate with the nearest local HUD Multifamily Hubs and Program Centers listed at http://www.hud.gov/offices/hsg/mfh/mfbroch/hubs_pcs.cfm or the nearest HUD Field Office listed in the Appendix IV of the Catalog.
EXAMPLES OF FUNDED PROJECTS:
CRITERIA FOR SELECTING PROPOSALS: