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Our clients keep asking: when do we expect interest rates to come down? Our response has been to remind our clients of the Fed’s mission: to ensure stability in the nation's monetary system to promote optimal macroeconomic performance. In more practical terms: keep inflation in check and foster a strong job market, primarily characterized by low unemployment. As long as inflation remains high and unemployment remains low, we can expect no reprieve from these higher interest rates.

And, so, it has been almost a year since our last interest rate update. The interest rate environment has remained stable, albeit stubbornly high, driven by strong a job market and persistent inflation. That is, until earlier this week. Hence, we bring you today’s update.

The Bureau of Labor Statistics reported last week that the national unemployment rate rose in July 2024 to 4.3%, the first time above 4% since January 2022, and up from 3.7% since the start of the year. Meanwhile, the U.S. CPI was down to 3% in June 2024 and 0.5% over the prior 3 months. On Monday, the S&P fell 3%, the Nasdaq tumbled 3.4%, and the Dow slipped 2.6% over recession fears. It was the worst one-day drop in about 2 years.

On Monday, as the markets were falling, Chair Jerome Powell indicated that the Federal Reserve is becoming more convinced that inflation is headed back to its 2% target and said the Fed would cut rates before the pace of price increases actually reaches that point, the AP reports. The market is now pricing in a 0.25%-0.50% rate cut in the upcoming FOMC meetings in September.

The yield on the US 10 Yr fell to 3.78% on Monday, approximately 100 basis points lower than 3 months ago, although it has since rebounded some, now hovering around 4%. The average rate on the popular 30-year fixed rate mortgage is down to 6.52%, 31 basis points lower compared to this time last week. HUD commercial interest rates have come down as well, but the market remains volatile. Check out today’s rates.

HUD Commercial Loan Rate Update – August 8, 2024

• 35-year fixed FHA perm loans: 5.25%-5.65%
• 40-year fixed FHA construction/perm loans: 5.75%-6.15%

These pricing indications are current as of the date posted, subject to market interest rate volatility.  Pricing of FHA insured apartment and healthcare loans may be dependent on loan size and other risk factors. Call for more information.

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U.S. Department of Housing & Urban Development (HUD) published its Annual Indexing of Basic Statutory Mortgage Limits for Multifamily Housing Programs and its Annual Revisions to Base City High Cost Percentage. The 2024 base statutory per-unit lending limits have increased 4.9% from 2023. The local high cost multiplier factor adjustments remained at 270% (2.7x) for all standard regions, with all such regions now eligible for the 315% (3.15x) multiplier waiver, and a few non-contiguous regions designated as a "Special Limit Area" now eligible for 405% (4.05x) multiplier adjustment factor.

The following are the published Basic Statutory Mortgage Limits for Calendar Year 2024 for Section 221(d)4 and 223(f) loan programs:

221(d)4 Multifamily New Construction & Sub-Rehab

Bedrooms	Non-elevator	Elevator
0	$64,666	$69,853
1	73,409	80,080
2	88,733	97,379
3	111,374	125,974
4+	125,851	138,285

223(f) Multifamily Purchase or Refinance

Bedrooms	Non-elevator	Elevator
0	$64,979	$75,792
1	71,980	83,980
2	85,980	102,976
3	105,977	128,972
4+	119,977	145,833

HUD insured loan programs offer long term, low interest rate financing for new construction and permanent financing for qualifying affordable housing and market rate apartment projects.  The popular Section 221(d)4 and 223(f) multifamily loan programs offer loan amounts up to 85%-90% LTV / LTC (80% for cash-out refinances) supported by a 1.176x – 1.11x DSCR.  However, loan proceeds available under these programs are subject to HUD’s statutory per unit lending limit caps. The statutory mortgage limits serve to limit HUD’s exposure to an individual project by capping loan proceeds on a per-unit basis.

This 4.9% increase in statutory lending limits from 2023, following last year's 8.3% increase from 2022, should continue to help HUD financing become more competitive and open up HUD financing as a viable option for more projects. Although historically most projects were unaffected, HUD’s statutory mortgage limits have recently become more relevant with the rise in construction costs and real estate values which otherwise support more debt under the HUD loan program. HUD’s statutory lending limits had previously not kept pace, as annual statutory limit adjustments are based only on increases in the Consumer Price Index, which had been below the real estate valuation and construction cost increases experienced in the market. Statutory lending limit waivers have also become more difficult to obtain based on updated guidance from HUD. For example, HUD statutory limit waivers are not considered for cash-out refinance transactions. With inflation slowing down and the rise in interest rates starting to cool real estate valuations, this 2024 statutory limit increase should help close the gap.

Additional details are provided in the formal published notices linked to above. Contact Us for more information and to learn more about HUD loan programs. 

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Interest rates to remain high. That was the takeaway from Fed Chair Jerome Powell's address to central bankers at the annual Jackson Hole Symposium earlier today. "We are prepared to raise rates further if appropriate, and intend to hold policy at a restrictive level until we are confident that inflation is moving sustainably down toward our objective," said Powell. The market is now anticipating at least one more rate hike before the end of the year, and no rate cuts until 2024.

The average rate on the popular 30-year fixed mortgage is up to 7.57%. The yield on the US 10 Yr is now hovering around 4.25%, up approximately 275 basis points since the start of 2022. HUD commercial interest rates are hovering in the 5.70%-6.70% range over the past 3 months.  Check out today’s rates.

HUD Commercial Loan Rate Update – August 25, 2023

• 35-year fixed FHA perm loans: 5.95%-6.25%
• 40-year fixed FHA construction/perm loans: 6.40%-6.70%

These pricing indications are current as of the date posted, subject to market interest rate volatility.  Pricing of FHA insured apartment and healthcare loans may be dependent on loan size and other risk factors. Call for more information.

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Interested in learning more about FHA's attractive loan programs?
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U.S. Department of Housing & Urban Development (HUD) announced the first increase of its Large Loan threshold for multifamily properties to $120 million, up from $75 million since the policy was first rolled out in 2014. Large Loans are subject to stricter underwriting parameters, which you can read more about in our HUD 221(d)(4) and 223(f) loan program overviews.

HUD insured loan programs offer long term, low interest rate financing for new construction and permanent financing for qualifying affordable housing and market rate apartment projects.  The popular Section 221(d)(4) and 223(f) multifamily loan programs offer loan amounts up to 85%-90% LTV / LTC (80% for cash-out refinances) supported by a 1.176x – 1.11x DSCR.  However, loan proceeds available under these programs for Large Loans are reduced to 75%-87% LTV / LTC (70% LTV for cash-out). HUD's policy to limit loan proceeds and impose additional risk mitigation requirements for Large Loans reduces the risk to the FHA insurance fund, while making such loans less attractive to borrowers, by design. This Large Loan policy update reflects HUD's increased appetite for loans in the $75 million to $120 million range. "HUD’s risk analysis and industry feedback showed this revision was prudent to revise upward, primarily due to cost increases of housing and construction over the last decade, without providing undue risk to the FHA insurance fund," notes HUD in its formal published Mortgagee Letter 2023-14: Revisions to Large Loan Risk Mitigation MAP Guide Policies.

Additional details are provided by HUD in its formal published notice linked to above. Contact Us for more information and to learn more about HUD loan programs. 

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Interested in learning more about FHA's attractive loan programs?
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U.S. Department of Housing & Urban Development (HUD) published its Annual Indexing of Basic Statutory Mortgage Limits for Multifamily Housing Programs and its Annual Revisions to Base City High Cost Percentage. The base statutory per-unit lending limits have increased 8.3% from 2022. The local high cost multiplier factor adjustments remained at 270% (2.7x) for all regions, with fewer regions becoming eligible for the 315% (3.15x) multiplier waiver.

The following are the published Basic Statutory Mortgage Limits for Calendar Year 2023 for Section 221(d)4 and 223(f) loan programs:

221(d)4 Multifamily New Construction & Sub-Rehab

Bedrooms	Non-elevator	Elevator
0	$61,646	$66,591
1	69,980	76,340
2	84,589	92,831
3	106,172	120,090
4+	119,973	131,826

223(f) Multifamily Purchase or Refinance

Bedrooms	Non-elevator	Elevator
0	$61,944	$72,252
1	68,618	80,058
2	81,964	98,166
3	101,027	122,948
4+	114,373	139,021

HUD insured loan programs offer long term, low interest rate financing for new construction and permanent financing for qualifying affordable housing and market rate apartment projects.  The popular Section 221(d)4 and 223(f) multifamily loan programs offer loan amounts up to 85%-90% LTV / LTC (80% for cash-out refinances) supported by a 1.176x – 1.11x DSCR.  However, loan proceeds available under these programs are subject to HUD’s statutory per unit lending limit caps. The statutory mortgage limits serve to limit HUD’s exposure to an individual project by capping loan proceeds on a per-unit basis.

This 8.3% increase in statutory lending limits from 2022 should help HUD financing become more competitive and open up HUD financing as a viable option for more projects. Although historically most projects were unaffected, HUD’s statutory mortgage limits have recently become more relevant with the rise in construction cost and real estate values which otherwise support more debt under the HUD loan program. HUD’s statutory lending limits had previously not kept pace, as annual statutory limit adjustments are based only on increases in the Consumer Price Index, which had been below the real estate valuation and construction cost increases experienced in the market. Statutory lending limit waivers have also become more difficult to obtain based on updated guidance from HUD. For example, HUD statutory limit waivers are not considered for cash-out refinance transactions. But with inflation slowing down and the rise in interest rates starting to cool real estate valuations, this 2023 statutory limit increase should help close the gap.

Additional details are provided in the formal published notices linked to above. Contact Us for more information and to learn more about HUD loan programs. 

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Interested in learning more about FHA's attractive loan programs?
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Inflation remains stubbornly high. The U.S. CPI was up 0.5% in January 2023 and 6.4% over the previous 12-month period. "The latest economic data have come in stronger than expected, which suggested that the ultimate level of interest rates is likely to be higher than previously anticipated," said Fed Chair Jerome Powell in his address to the Senate Banking, Housing and Urban Affairs Committee on Capitol Hill earlier this week. The market is now pricing in a 0.50% rate hike in the upcoming FOMC meetings later this month.

The average rate on the popular 30-year fixed mortgage is up to 6.875%. The yield on the US 10 Yr is now hovering around 3.95%, approximately 200 basis points higher than 12 months ago. HUD commercial interest rates have settled in the 5.00%-6.00% range over the past 3 months.  Check out today’s rates.

HUD Commercial Loan Rate Update – March 9, 2023

• 35-year fixed FHA perm loans: 5.20%-5.50%
• 40-year fixed FHA construction/perm loans: 5.70%-6.00%

These pricing indications are current as of the date posted, subject to market interest rate volatility.  Pricing of FHA insured apartment and healthcare loans may be dependent on loan size and other risk factors. Call for more information.

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Interested in learning more about FHA's attractive loan programs?
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The Fed continued to act to combat persistently high inflation. The Fed voted today to raise the primary credit rate by 0.75% to 3.25%. Also, the Fed voted to reduce its holdings of Treasury securities and agency mortgage-backed securities to approximately $60 billion and $35 billion, respectively. This follows six months of sustained U.S. inflation rate coming in north of 8%. The Fed’s actions were consistent with its announcements at prior meetings and market expectations. The Fed’s official press release is available here.

The combination of inflation concerns and the Fed’s response of short-term interest rate hikes and reducing its balance sheet holdings has fueled a rapid increase interest rates. The average rate on the popular 30-year fixed mortgage is up to 6.25%, the highest since 2008, according to the MBA. The yield on the US 10 Yr is now hovering around 3.50%, approximately 200 basis points higher since the start of the year. HUD commercial interest rates have continued to climb,  approaching 5% and higher. Check out today’s rates.

HUD Commercial Loan Rate Update – September 21, 2022

• 35-year fixed FHA perm loans: 4.85%-5.10%
• 40-year fixed FHA construction/perm loans: 5.30%-5.65%

These pricing indications are current as of the date posted, subject to market interest rate volatility.  Pricing of FHA insured apartment and healthcare loans may be dependent on loan size and other risk factors. Call for more information.

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Interested in learning more about FHA's attractive loan programs?
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U.S. Department of Housing & Urban Development (HUD) announced plans to implement reductions in the upfront and annual mortgage insurance premiums (MIP) it charges under the Section 232 mortgage insurance program for qualifying residential care facilities that meet industry-recognized green building certifications. Upon implementation, MIP rates will be reduced to 0.25% for mortgages on properties that meet the new Section 232 Green MIP requirements. The current standard MIP rates are generally 1.00% upfront for year-1 and between 0.45% - 0.77% annually thereafter (see 232 MIP Rates and 232/223(f) MIP Rates).

The planned Section 232 Green MIP reduction follows the successful implementation of a similar Green MIP reduction under the HUD multifamily loan program. Under the multifamily program, to qualify for the Green MIP reduction, new construction multifamily projects most undergo a Statement of Energy Design Intent (SEDI), as part of application processing, which demonstrates that the building design meets an industry-recognized standard for green buildings, such as ENERGY STAR, National Green Building Standard, U.S. Green Building Council's LEED-H, and others. Once completed and stabilized, such properties must have their actual energy utility usage analyzed annually in a Statement of Energy Performance (SEP) that results in a passing score based on the selected green building standard. Existing projects that do not require additional repairs to qualify for the green building standard only need to undergo an SEP as part of application processing, and then again each year, thereafter. Similar requirements are anticipated under the Section 232 Green MIP program.

HUD insured loan programs offer long term, low interest rate financing for new construction and permanent financing for qualifying residential care facilities and apartment projects. The popular Section 232 and 232/223(f) residential care facility loan programs offer loan amounts up to 80%/90% (acquisition/new construction) LTC and 75%-85% LTV, as supported by a 1.45x DSCR.

Additional details regarding the Section 232 Green MIP reduction are available in the official FHA press release and Federal Register Notice. Give us a call for more information and to learn more about HUD loan programs. 

 

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With U.S. inflation surging to a new four-decade high of 8.5% in March, the Fed at its March meeting raised the federal funds rate by 25 basis points, the first such rate hike since the end of 2018, and signaled 6 forthcoming rate increases in 2022. The Fed also released a statement stating that it expects to begin reducing its holdings of Treasury securities and agency debt and agency mortgage-backed securities.

The combination of Fed’s short-term interest rate hikes and ending its purchases of long-term debt has sent interest rates soaring. The average rate on the popular 30-year fixed mortgage is now above 5%. The yield on the US 10 Yr is now hovering around 2.90%, up approximately 90 basis points over the past 8 weeks since our prior update. Over the same period, HUD commercial interest rates have climbed 30 basis points and are up approximately 80-90 basis points on the year. Check out today’s rates.

HUD Commercial Loan Rate Update – April 19, 2022

• 35-year fixed FHA perm loans: 3.75%-4.00%
• 40-year fixed FHA construction/perm loans: 4.30%-4.65%

These pricing indications are current as of the date posted, subject to market interest rate volatility.  Pricing of FHA insured apartment and healthcare loans may be dependent on loan size and other risk factors. Call for more information.

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Interested in learning more about FHA's attractive loan programs?
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U.S. Department of Housing & Urban Development (HUD) published its Annual Indexing of Basic Statutory Mortgage Limits for Multifamily Housing Programs and its Annual Revisions to Base City High Cost Percentage. The base statutory per-unit lending limits have increased 4.2% from 2021, while local high cost multiplier factor adjustments were increased to 270% (2.7x) for all regions, with additional regions becoming eligible for the 315% (3.15x) multiplier waiver.

The following are the published Basic Statutory Mortgage Limits for Calendar Year 2022 for Section 221(d)4 and 223(f) loan programs:

221(d)4 Multifamily New Construction & Sub-Rehab

Bedrooms	Non-elevator	Elevator
0	$56,992	$61,488
1	64,617	70,490
2	78,107	85,717
3	98,036	110,887
4+	110,779	121,723

223(f) Multifamily Purchase or Refinance

Bedrooms	Non-elevator	Elevator
0	$57,197	$66,715
1	63,360	73,923
2	75,683	90,643
3	93,285	113,526
4+	105,608	128,367

HUD insured loan programs offer long term, low interest rate financing for new construction and permanent financing for qualifying affordable housing and market rate apartment projects.  The popular Section 221(d)4 and 223(f) multifamily loan programs offer loan amounts up to 85%-90% LTV / LTC (80% for cash-out refinances) supported by a 1.176x – 1.11x DSCR.  However, loan proceeds available under these programs are subject to HUD’s statutory per unit lending limit caps. The statutory mortgage limits serve to limit HUD’s exposure to an individual project by capping loan proceeds on a per-unit basis.

Although historically most projects were unaffected, HUD’s statutory mortgage limits are increasingly become a factor with the rise in construction cost and real estate values which otherwise support more debt under the HUD loan program. HUD’s statutory lending limits have not kept pace. Annual statutory limit adjustments are based only on increases in the Consumer Price Index, which has been below the real estate valuation and construction cost increases experienced in the market. Statutory lending limit waivers have also become more difficult to obtain based on updated guidance from HUD. For example, HUD statutory limit waivers are not considered for cash-out refinance transactions.

Additional details are provided in the formal published notices linked to above. Contact Us for more information and to learn more about HUD loan programs. 

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Interested in learning more about FHA's attractive loan programs?
Click to learn more!