How We Structure HUD Loans

Out of a construction loan during lease-up, with cash back

• The property: A newly built market-rate garden community of about 100 units in the Mountain West.
• The problem: The bank construction loan needed to be retired while the property was still leasing up. At the first sizing, the refinance would have required the owner to bring cash to closing.
• What we did: Applied to HUD as soon as every building had its certificate of occupancy and occupancy was above HUD's threshold, with HUD's approval to apply before a full month at the required coverage. To avoid the cash requirement, we structured a rate buydown financed in the loan.
• The result: A 35-year fixed-rate, non-recourse 223(f) that paid off the construction loan and returned cash to the owner instead of requiring it.

Historic school buildings converted to apartments

• The property: Two former school buildings, one nearly a century old, converted to fewer than 100 market-rate apartments and a few commercial spaces in a small Southeastern city.
• The problem: A construction loan on a property that had just finished lease-up, less than 3 years after completion.
• What we did: Qualified the property under HUD's rules for newer properties, completed HUD's floodplain review, and kept a separate building leased to the city out of the HUD collateral.
• The result: A 35-year fixed-rate, non-recourse 223(f) that paid off the construction loan and returned equity to the developer.

Renovating a tax-credit property without refinancing the first mortgage

• The property: A 1990s tax-credit community of more than 150 family units in the Southeast, already financed with a HUD 223(f) we made.
• The problem: The property needed a substantial renovation and a recapitalization into a new tax-credit partnership, and the owner wanted to keep the existing low-rate first mortgage.
• What we did: The new partnership took over the existing 223(f) through HUD's transfer process, and we added a 241(a) supplemental loan behind it, alongside tax-exempt bonds and 4% tax-credit equity. Because the first mortgage is a 223(f), Davis-Bacon prevailing wages did not apply.
• The result: The renovation was funded with the first mortgage left in place, and the supplemental loan's amortization matched to the first mortgage's remaining term.

A new construction loan carried through the rate spike

• The property: A garden community of more than 300 units in a fast-growing Texas metro.
• The problem: HUD issued the Firm Commitment in 2022, and rates rose sharply before the deal could close.
• What we did: Extended and reopened the commitment, resized the loan to the new rate environment, and sized a conservative operating deficit reserve, funded by letter of credit.
• The result: A 221(d)(4) closed in 2024 with a 40-year fixed rate after construction, non-recourse. Construction is complete.