The Federal Housing Administration (FHA) is providing a helping hand to some multifamily developers that started construction but had their financing pulled after completing the foundation.
FHA generally does not insure multifamily projects where construction has already started. But for the next six months, the federal mortgage insurer is willing to consider applications in cases where construction was halted early and only foundation and site preparation work was completed.
The FHA mortgagee letter indicates that the agency is not going to insure multifamily loans for condominium projects that are 90% complete and are trying to convert to rental units. To qualify, developers have to prove that their financing was cancelled and they have been unable to find alternative financing.
The Department of Housing and Urban Development said it is taking this step "due to the illiquidity in the financial markets." The mortgagee letter points out some lenders are backing out of commitments and refusing to fund construction draws.
The Census Bureau recently reported that multifamily starts fell to an all-time low of 80,000 units in July, down 72% from a year ago.