The Federal Housing Administration (FHA) published a Mortgagee Letter on June 28 that increased the threshold at which a Multifamily loan is considered a Large Loan from $75 million to $120 million. This was the first increase in the threshold since 2014 and it will enable a greater number of transactions to use standard underwriting processes when submitted for FHA Multifamily insurance.
FHA also announced that it will review the threshold on an annual basis, with the possibility of increasing it in $5 million increments if warranted. The changes are designed to simplify underwriting for multifamily housing development without presenting undue risk to FHA, and to provide for regular adjustments to the threshold so it does not unduly lag market changes.
Assistant Secretary for Housing and Federal Housing Commissioner Julia Gordon said, “We know that borrowers are contending with the dual challenges of increased development costs and meeting the nation’s dire need for more rental housing. Anything we can do to prudently alleviate extra steps in obtaining FHA insurance will help all of us meet the housing supply challenges before us.”
Reacting to the change, Mortgage Bankers Association President Bob Broeksmit said, “MBA has long advocated for this move, citing labor and supply shortages, higher construction costs, and the importance of having loan limits that are consistent with economic conditions. The increase to the threshold—along with a new method to review it on an annual basis—will help to ensure that HUD multifamily financing is a viable option at all times during the lending cycle.”
FHA’s Large Loan policies contained in its Multifamily Accelerated Processing (MAP) Guide include additional FHA insurance underwriting requirements for loans that exceed the threshold for Large Loans. Other than the threshold amount, FHA’s requirements in the MAP Guide related to these Large Loans remain unchanged. The additional requirements do not apply to loans below the threshold.