FHA Insurance
Programs Section 223(a)(7) -
Refinance for FHA Insured Projects
Purpose: Provides mortgage insurance in connection with the
refinance of projects currently insured by FHA. Available for profit
motivated or non-profit borrowers and multifamily or healthcare
projects.
Eligible Borrowers: Profit motivated, non-profit and public
owners are eligible.
Maximum Term: The term of the new mortgage may not exceed the
remaining term of the existing mortgage, except in special cases where
due to project feasibility, FHA may extend the new term up to 12 years
beyond the term of the original mortgage.
Maximum Loan:
The lesser of:
(1) the original principal amount of the existing insured mortgage;
(2) the unpaid principal balance of the existing insured mortgage plus
the cost of required repairs, improvements, outstanding debt incurred in
connection with capital improvements (as approved by the HUD field
office), prepayment penalties, and loan closing costs;
(3) the amount that can be supported by 90% of net operating income
(95% if owner is non-profit).
Prepayment: Typically either: (i) closed for 10 years then open
to prepayment at par, or (ii) closed for two years then open to
prepayment at 108% of outstanding balance in year three, declining 1%
per year.
Personal Liability: None.
FHA Application Fees: 0.3% of the loan amount. After endorsement
of the new mortgage note, HUD will approve a request for up to one-half,
or 0.15%, of the application fee.
Mortgage Insurance Premium: Approximately .5% of the outstanding
loan amount.
Inspection Fee: None.
Funding: Qualifies for government guaranteed mortgage-backed
securities or direct placement or may be used to credit enhance
tax-exempt bonds.
Interest Rate: Subject to market conditions.
Territory: Nationwide.
The Program has the following additional parameters:
Funds to cover minor repairs and costs of the transaction can be
included in the mortgage loan. Outstanding debt incurred in connection
with capital improvements already made to the property may also be
included in the mortgage loan, subject to FHA approval.
The term of the new mortgage may not exceed the remaining term of the
existing mortgage though FHA may extend the new term up to 12 years
beyond the term of the original mortgage if it is required for project
feasibility.
Davis Bacon prevailing wage requirements do not apply to required
repairs.
Loans insured under 223(a)(7) assume program characteristics of the
underlying mortgage insurance program.
Processing Section 223(a)(7) applications usually takes from 6 to 8
weeks.
In its pre-qualifying review, American Trust Corporation will estimate
both the loan amount and the fees and costs associated with the
transaction. Actual loan amounts and actual fees and expenses may vary
from the pre-qualifying estimates. A pre-qualifying estimate is not a
commitment to make a loan.
Application Fee: $2,500 non-refundable inspection/loan processing
fee payable to American Trust Corporation with the loan application,
will be credited to origination fee at closing
Origination Fee: 1%
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