Investors who provide loan capital to MHDF, receive a quarterly interest payment equal to their outstanding loan balance times the interest rate on the loan. Interest rates on loans to MHDF range from 2% to 5%. Since MHDF desires to provide low cost financing to their borrowers, MHDF strives to raise low cost loan capital. This most frequently comes from EQ2 loans and government agencies.
Investors who provide equity capital and operating financing to MHDF, do not receive a financial return on their investment.
Since all of the loan capital provided to MHDF is used to finance housing for households at 60% or less of the area median income, all investments may qualify for loan or investment credit under the Community Reinvestment Act. Click Here for a document that provides more details on this Act.
Predevelopment lending and the other non-traditional lending provided by MHDF, can be more risky than conventional financing. In order to mitigate this risk, MHDF provides technical assistance to its borrowers and remains directly involved in the pre-development and development process. By being directly involved with the borrower during the application process for construction, permanent and equity financing, MHDF has a strong indication of the development's success. Loans are made to borrowers for affordable housing developments that are expected to receive a source of financing that will repay the loan from MHDF. Since its inception in 2000, MHDF has had one write off equal to .09% of the loans made to date