Builder and Sponsor’s Profit and Risk Allowance (BSPRA) in Relation to HUD 221(d)(4) Loans
For HUD 221(d)(4) loans, Builder and Sponsor’s Profit and Risk Allowance (BSPRA) consists of an allowance of 10% of the estimated project cost. Since the mortgage calculation contains no builder profit, this allowance is used as a credit to the builder. Their profit (essentially “paper equity”) is then exchanged for a certain amount of ownership in the project. BSPRA is used where there is an identity of interest (joint custody or ownership) between the mortgagor and general contractor. It is expressly used to reduce cash at closing.
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