Andrews: FHA begins push to speed up LIHTC applications
To my knowledge, no one has ever accused their local HUD office of moving too fast. No one has ever said that they prefer FHA financing to other sources because of speed. We typically use these programs despite traditionally long processing times because of lower equity requirements, longer terms and competitive interest rates. Historically, this time element has caused problems for affordable housing investors who face inflexible closing and performance deadlines in their Low Income Housing Tax Credit applications, making the FHA programs a risky choice, since missing a deadline could result in losing their tax credit—and could impair the borrower's ability to secure future tax credits. But given the federal government's focus on providing affordable rental housing to the masses, which arguably requires LIHTC equity, and the lack of private financing alternatives to support that housing, something had to be done to make the government programs compatible.
The FHA has stepped up and recently announced a four-city pilot program to test faster processing times for LIHTC deals. A press release says "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." This is an ambitious goal but one that the FHA thinks is needed. "It has become clear that we need to rethink our process at FHA if we hope to leverage LIHTC to the maximum degree possible," say 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."
Chicago, Detroit, Boston and Los Angeles are the initial test cities for this program. Marie Head, HUD's deputy assistant secretary for multifamily housing, says, "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." Faster processing will be good for the industry. Let's hope this pilot program works.
(Brian Andrews is a certified mortgage banker specializing in the financing of commercial real estate. His business is Andrews Commercial Real Estate Services, and he can be reached at firstname.lastname@example.org.)
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