The Federal Housing Administration (FHA) has unveiled a new pilot program to test an accelerated approval process for the purchase or refinancing of multi-family rental properties assisted through the Low-Income Housing Tax Credit (LIHTC) Program. In launching this pilot program in Chicago, Detroit, Boston and Los Angeles, FHA’s Office of Multifamily Housing Programs believes it can cut the time needed to review and approve financing applications for LIHTC-assisted transactions from approximately one year to just 90-120 days. The Hubs will process LIHTC loans for all of their related program centers.
Reducing the time required to review and approve applications under FHA’s Section 223(f) Program helps align FHA-insured financing with the LIHTC Program standards including the need to meet strict time deadlines. Expediting FHA review and approval is needed since failure to meet bond closing or other LIHTC performance deadlines may result in forfeit of the credit allocation or bond reservation and may impair the borrower’s ability to secure tax credits for future transactions. Read FHA’s Housing Notice for details of this pilot program.
“It has become clear that we need to rethink our process at FHA if we hope to leverage LIHTC to the maximum degree possible,” said FHA’s Acting Commissioner Carol Galante. “This pilot program will test our ability to significantly cut our review process so we can put people in affordable homes and provide unique financing options for developers.”
The Housing and Economic Recovery Act of 2008 (HERA) required FHA to streamline mortgage insurance applications for projects with equity from the Low Income Housing Tax Credit (LIHTC) program. Last year, FHA endorsed approximately $561 million in firm commitments for LIHTC projects, a 35 percent increase over Fiscal Year 2010. This new pilot should help to increase those numbers even more.
“If we can successfully cut the time it takes to approve these lower risk LIHTC projects in these four cities, we have the potential to dramatically increase the production of affordable rental projects nationwide,” said Marie Head, HUD’s Deputy Assistant Secretary for Multi-family Housing.