FHA increases multifamily large loan threshold

The Federal Housing Administration (FHA) published Mortgagee Letter (ML) 2023-14 this week, which increases the threshold from $75 million to $120 million for multifamily loans to be considered large loans.

This marks the first major increase to the threshold since 2014. The goal of the increase is to “enable a greater number of transactions to use standard underwriting processes when submitted for FHA Multifamily insurance,” the agency said.

The FHA said it will also review the threshold on an annual basis, leaving open the possibility for future increases in $5 million increments.

The review schedule and loan threshold changes are designed to “simplify underwriting for multifamily housing development without presenting undue risk to FHA,” the agency said, and to allow for regular adjustments in response to market changes.

“We know that borrowers are contending with the dual challenges of increased development costs and meeting the nation’s dire need for more rental housing,” said FHA Commissioner Julia Gordon. “Anything we can do to prudently alleviate extra steps in obtaining FHA insurance will help all of us meet the housing supply challenges before us.”

Another driver was the age of the threshold, which was nearly a decade old prior to the increase, according to Ethan Handelman, deputy assistant secretary for Multifamily Housing.

“Revising the threshold, which is almost a decade old, is an important step for us and for the industry,” he said. “We want stakeholders to be able to rely on FHA-insured financing for a wide variety of multifamily transactions, and without unnecessary barriers.”

The new ML “includes page revisions to the [Multifamily Accelerated Processing (MAP)] Guide to reflect the new $120 million threshold and the annual review methodology,” the agency said. “FHA’s other requirements in the MAP Guide related to Large Loans remain unchanged.”

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