HUD 241(a) Loan Program
Finance Improvements, Additions or Repairs to Existing FHA-insured Properties
• Davis-Bacon Act not required when first mortgage is a 223(f)
• Allows additional units to be built on contiguous sites
Market-Rate Properties
Interest Rate and Term
Prepayment
Additional Requirements
Other
• 90% loan-to-cost
• 1.11x Debt Service Coverage
• Statutory mortgage limitation (per unit)
• Fixed rate (fully amortizing) subject to market conditions at rate lock
• Coterminous with underlying first mortgage
• Flexible 10-year prepayment structure
• New Construction Escrows: (1) Working Capital: 4% of loan amount (2) Operating Deficit Escrow: 3% of loan amount
• Substantial Rehab Escrows: (1) Working Capital: 2% of loan amount Waivable for certain Rent Assisted or LIHTC properties
• Cost certification required for market-rate properties
• Limits on commercial income and space apply; 20% minimum vacancy
• Davis-Bacon Act requirements apply to the cost of improvements, additions or repairs only if the underlying first mortgage was subject to Davis-Bacon
• A cross-default provision will be placed in the loan documents
• If different lenders will service the first and supplemental loan, an agreement must be executed designating a single firm to hold and manage the reserve account