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    Borrowers
Underwriting Requirements :
  MHDF underwrites each loan application based upon following factors :
 

A.  The Qualifications of the Borrowers:

  1. Financial strength and history
  2. Property Management capacity/experience
  3. Development Team capacity
B.  The Quality of the Project
  1. Collateral
    When possible, MHDF will obtain a first lien position on all assets financed with loan proceeds; other options include: a lien on all assets subordinate to the primary lender; full guaranty of the Project Sponsor and/or other entities or individuals related to the project.
  2. Project Site
    The following information may be required as appropriate for the stage of development:
    • The identified project site or sites accommodates an affordable housing rental development with a sufficient number of dwelling units to support the debt on the project. An engineer or architect's report with a site plan and/or plans and specifications will be reviewed if available. There should generally be at least six dwelling units.
    • Evidence of site control
    • Evidence the project site has received or is eligible to receive zoning approval for the type of project proposed.
    • Evidence of neighborhood stability or strong prospects for such stability.
    • Evidence the project site accessible by publicly maintained roads.
    • The project is located in an area that reasonably can be anticipated to provide qualified low or moderate income tenants to rent the project to acceptable vacancy levels, and the project concept and design demonstrate marketability. A market analysis, or in some cases a formal market study, will be required.
  3. Project Financing
    The following information may be required as appropriate for the stage of development:
    • Loan commitments or letters of intent from all of other financing sources.
    • For construction loans, take-out financing has been committed.
    • Determination that repayment structure is appropriate.
  4. Project Management and Operations
    Projects must show the ability to meet the following criteria when fully developed:
    • Rent levels must be established so as to provide sufficient market for the project while assuring that the project qualifies for low income use under all sources of financing.
    • Management fees will be sufficient to provide alternate management for the project should the original management company be unable to continue management.
    • Replacement reserves will be set aside on an annual basis, and will normally equal $350 per unit per year for family projects and $250 per unit per year for elderly projects.
    • Insurance costs, trash pick-up and other contracted services are based on quotations or experience in other similar projects.
    • Property taxes are based on realistic assumptions. Available tax abatement programs may be included in projections.
    • Project underwriting will include an analysis of the project's projected ability to pay expenses keeping pace with inflation as well as ability to raise rents within the guidelines of the public or private financing committed to the project. The financial impact of abatements or the loss of abatements must be fully considered.
    • A market analysis and a plan or strategy for the project to establish a reasonable lease up period and long-term market viability may be required.
    • If the project is already in operation, projections will be based upon actual results.
  5. Project Development:
    The following will be required as appropriate for the stage of development and approved by MHDF:
    • Detailed and satisfactory architectural and engineering reports establishing the nature and feasibility of the construction, or a satisfactory work write-up and rehabilitation plan must be submitted.
    • Adequate contingency reserves to cover unanticipated costs are expected to be included in the budget. Construction hard cost contingencies are expected to be at least 5% to 10%. This percentage may be higher for rehabilitation projects.
    • Soft costs must be explained, and if possible, documented. Full funding of holding costs, lease up expenses, construction period interest, lenders fees, and legal fees are expected to be included in the project budget.
    • Reserves for the lease up period may be required.
    • Operating deficit reserves will be required equal to 6-12 months of operating expenses plus debt services.
    • A detailed, realistic and satisfactory project completion schedule showing the projected completion date, the certificate of occupancy date, and the projected 95% occupancy date must be submitted.
    • A detailed, realistic and satisfactory construction cost analysis based on the completed plans and specifications must be submitted.
    • Completed plans and specifications for the construction or rehabilitation project must be submitted.
  6. Loan Repayment Plan:
    To be eligible to receive a loan from MHDF, the borrower must demonstrate a reasonable loan payment plan in accordance with the required loan terms.
   
 
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