Green MIP Reduction for HUD 221(d)(4) Loans
While FHA MIP is usually less expensive than the private mortgage insurance one would pay on a privately-insured loan, it can still get expensive. Fortunately, HUD is now allowing investors and developers to reduce their MIP payments to 0.25%, provided they make energy efficient improvements to their project.
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While FHA MIP is usually less expensive than the private mortgage insurance one would pay on a privately-insured loan, it can still get expensive. Fortunately, HUD is now allowing investors and developers to reduce their MIP payments to 0.25%, provided they make energy efficient improvements to their project.
How to Qualify for a Reduced MIP
In order to be eligible for reduced MIP for new construction, the developer/owner needs to have a Energy Star Statement of Energy Design Intent (SEDI) performed and must achieve a minimum score of 75. For existing buildings, such as those that are using a HUD 221(d)(4) loan to complete a substantial rehabilitation, the developer/owner needs to achieve a Energy Star SEP (Statement of Energy Performance) of 75. To maintain the 0.25% MIP discount, the developer/owner must maintain a 75+ score over the life of the loan. In addition, buildings must be re-certified each year. Because of that, it's a good idea for buildings to have a score somewhat higher than 75. This gives them a little bit of cushion for future certifications.
If you're interested in getting reduced MIP for your HUD multifamily development under this program, but your building doesn't quite reach a score of 75, you can hire a qualified green building professional to complete an audit and re-design your plans in order to reach the required score.
To learn more about how the HUD 221(d)(4) loan can help finance your multifamily development, fill in the form below and a HUD loan specialist will get in touch.
Related Questions
What is a HUD 221(d)(4) loan?
A HUD 221(d)(4) loan is a loan program that finances the construction and substantial renovation of properties with 5+ units. This can include traditional apartment buildings, mixed-use properties with a limited amount of commercial space, and even independent living projects for seniors. These loans offer leverage up to 85% of cost for market-rate developments, going even higher for affordable properties. They are fixed rate and fully amortizing for 40 years after an up to three-year, fixed-rate, interest-only period during construction. HUD 221(d)(4) debt is nonrecourse with standard carve-outs.
For more information, download our easy-to-read HUD 221(d)(4) loan term sheet.
How does the Green MIP Reduction work for HUD 221(d)(4) loans?
The Green MIP Reduction for HUD 221(d)(4) loans allows developers to reduce their MIP payments to 0.25%, provided they make energy efficient improvements to their project. To qualify for the reduction, developers must have an Energy Star Statement of Energy Design Intent (SEDI) performed and score at least 75 on it. The building must also be re-certified every 12 months to maintain the reduction. For more information, please visit www.multifamily.loans/hud-221d4-loans and hud221d4.loan/hud-221-d4-faqs/green-mip-reduction-for-hud-221d4-loans.
What are the benefits of the Green MIP Reduction for HUD 221(d)(4) loans?
The Green MIP Reduction for HUD 221(d)(4) loans offers developers the opportunity to reduce their MIP payments to 0.25%. This is a significant reduction from the typical MIP of 0.65% for market rate projects and 0.45% for Section 8 or LIHTC projects. In order to qualify for the reduction, developers must make energy efficient improvements to their project, have Energy Star Statement of Energy Design Intent (SEDI) performed, and score at least 75 on it. The building must also be re-certified every 12 months in order to maintain the green MIP reduction.
Sources: Green MIP Reduction for HUD 221(d)(4) Loans, HUD 221(d)(4) Loans
What are the eligibility requirements for the Green MIP Reduction for HUD 221(d)(4) loans?
In order to qualify for the Green MIP Reduction for HUD 221(d)(4) loans, developers must make energy efficient improvements to their project and have a Energy Star Statement of Energy Design Intent (SEDI) performed. The project must score at least 75 on the SEDI in order to qualify for the reduced MIP rate of 0.25%. The building must also be re-certified every 12 months in order to maintain the green MIP reduction.
What are the restrictions for the Green MIP Reduction for HUD 221(d)(4) loans?
The Green MIP Reduction for HUD 221(d)(4) loans requires developers to make energy efficient improvements to their project and score at least 75 on the Energy Star Statement of Energy Design Intent (SEDI). To maintain the green MIP reduction, the building must be re-certified every 12 months.
For more information, please see HUD 221(d)(4) Loans and Green MIP Reduction for HUD 221(d)(4) Loans.
How can I apply for the Green MIP Reduction for HUD 221(d)(4) loans?
You can apply for the Green MIP Reduction for HUD 221(d)(4) loans by making energy efficient improvements to your project and having an Energy Star Statement of Energy Design Intent (SEDI) performed. The project must score at least 75 on the SEDI in order to qualify for the reduction. To maintain the green MIP reduction, the building must be re-certified every 12 months.
For more information, please visit www.multifamily.loans/hud-221d4-loans and hud221d4.loan/hud-221-d4-faqs/green-mip-reduction-for-hud-221d4-loans.