HUD Issues Proposed Rule to Revise Risk-Sharing Program

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rules and regulations

In a move that could affect our multifamily members, HUD issued a proposed rule today to revise its regulations for the Section 542(c) Housing Finance Agencies Risk-Sharing Program.

The program provides credit enhancement for mortgages of multifamily housing projects whose loans are underwritten, processed, serviced and disposed of by housing finance agencies (HFAs). HUD and HFAs share in the risk of the mortgage, which enables HFAs to provide more insurance and credit for multifamily loans.

Under the program, qualified state and local HFAs may originate and underwrite affordable housing loans that include new construction, substantial rehabilitation, refinancing and housing for the elderly. HFAs may elect to share 10%-90% of the loss on a loan with HUD. In the event of a claim, the HFA reimburses HUD pursuant to terms of the risk-sharing agreement.

This proposed rule would amend existing regulations for the program so that they better align with policies for other HUD programs, reflect current industry and HUD practices, and conform to statutory amendments.

Additionally, this proposed rule would provide HUD with greater flexibility in operating the Section 542(c) HFA Risk-Sharing program over time, and would provide more flexibility for certain HFAs accepting a greater share of the risk of loss on mortgages insured under the program.

HUD is providing only a 30-day comment period. Comments are due on or before April 7.

NAHB will review this proposed rule in consultation with the Multifamily Finance Subcommittee. Members who wish to offer feedback for consideration as part of NAHB’s comments should email Michelle Kitchen at mkitchen@nahb.org.

For more information, see the proposed rule in the Federal Register.

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