FHA Multifamily Products

Enterprise Point of Contact:

Amanda Sheldon Roberts
Housing Director
Last Updated: December 13, 2011

Issue Background: FHA Multifamily Products

Congress created the Federal Housing Administration (FHA) in 1934. FHA is now a part of the Department of Housing and Urban Development (HUD) and provides mortgage insurance on single-family, multifamily and manufactured homes and hospital loans made by FHA-approved lenders throughout the United States. FHA-insured loans require lower downpayments and grant greater flexibility in calculating income and payment ratios. Lenders bear less risk because FHA will pay the lender if a borrower defaults on the loan. The cost of the mortgage insurance is passed along to the borrower and typically is included in the monthly payment. FHA has insured over 38 million home mortgages since 1934. During the recent recession and housing crisis the FHA share of the mortgage market exceeded historical norms.

FHA offers several multi-family mortgage and healthcare facility loan insurance products. Enterprise is a FHA approved Multifamily Accelerated Processing (MAP) lender and offers the following loans for nonprofit and for-profit sponsors:

Construction and permanent financing for multifamily housing (Sections 221(d)(3) and 221(d)(4)) and housing for the elderly (Section 231)
Refinancing or acquisition of existing multifamily properties (Section 223(f))
Financing for residential care facilities (Sections 232 and 232/223(f))
Refinancing existing FHA insured loans (223(a)(7))

Additionally, FHA offers the Section 220 product that provides mortgage insurance for rental housing for urban renewal and concentrated development areas.

Current Policy State

Given the recent increase in FHA market share, many lawmakers are concerned about the financial stability of FHA. However, with mortgage credit tight across the country, FHA is one of the main vehicles for single-family and multifamily loans and many lawmakers recognize the important role the FHA is playing in the current market. Concern about FHA has been exacerbated by a recent reduction in the secondary reserves of FHA. FHA is mandated to have a secondary reserve level of 2 percent at all times, but a November 2009 actuarial review reported a level of 0.52 percent, largely the result of poor performance of single-family loans originated prior to the economic recession. Therefore, Congress held several hearings on FHA’s financial condition and several reform bills were introduced. However, no comprehensive FHA bills passed both chambers during the 111th Congress or the 112th Congress to date. FHA has recently made regulatory changes to its underwriting criteria to bolster its financial health.

Legislative Priorities

Enterprise recognizes the critical role that FHA plays in providing mortgages to low- and moderate-income homebuyers and supports efforts to bolster the financial health of FHA so that it can continue to serve its mission in the future. Enterprise is especially interested in the FHA multifamily mortgage products, green building, and the role that FHA can play in bringing mortgage liquidity back to high-foreclosure neighborhoods.

Enterprise Point of Contact:

Issue Background: FHA Multifamily Products

Current Policy State

Legislative Priorities

Publications and Resources

Enterprise FHA Permanent and Construction-to-Perm Financing Products

External Resources