FHA Multifamily Commercial Loans

by A. Heinrich

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Section 223(a)(7) of the National Housing Act, passed by Congress in 1937, created the Federal Housing Administration to promote home-ownership by low to middle class families. The administration?s role in mortgage origination is limited to insuring loans that commercial banks, credit unions, and life insurance companies originate. The loans secured by the FHA are eligible for securitization by the Government National Mortgage Association (Ginnie Mae), and are also purchased on the secondary market by Fannie Mae and Freddie Mac. Whereas the FHA secures loans against default on the primary market ? paying lenders back for any losses on those loans ? Ginnie Mae insures the securities backed by these loans?paying investors back for any losses on the security investment.

The role of the FHA in the commercial lending industry is limited to insuring loans on multifamily and health care properties. The FHA lists around a dozen loan programs, covering the purchase, refinance, construction and rehabilitation of apartments, cooperative housing units, manufactured home parks, single room occupancy projects, condos, nursing homes, assisted-living facilities and hospitals. The details of the FHA's multifamily programs can be viewed at http://www.hud.gov/offices/hsg/mfh/progdesc/progdesc.cfm. These loans are originated by any of a number of lenders that have been approved by the Department of Housing and Urban Development (HUD; which manages the FHA). These lenders include the Bank of America, BNC Mortage, East West Bank, Capmark (formerly GMAC), Impac Funding, and PNC Multifamily Finance. A more extensive?but non-exhaustive?list of FHA lenders, along with other local information concerning FHA loans and commercial properties, can be accessed via the local "Multifamily Hubs and Program Centers" page at http://www.hud.gov/offices/hsg/mfh/mfbroch/hubs_pcs.cfm. One can also search for FHA lenders given certain limited criteria at http://www.hud.gov/ll/code/llplcrit.html

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