Box 22, Folder 19, Document 14

http://allenarchive.iac.gatech.edu/originals/ahc_CAR_015_022_019_014.pdf

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Box 22, Folder 19, Document 14

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FINANCING METHODS
PUBLIC HOUSING ADMINISTRATION
The 1965 Housing Act authorizes the Public Housing Authority to fund the
purchase and rehabilitation of existing structures through local Housing
Authorities.
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This program permits local Housing Authorities to contract a property purchase and rehabilitation with a builder. Upon project completion, the
builder is reimbursed for total project costs (land acquisition-rehabilitati~n).
The project title and management reverts to the local Housing Authority.
FNMA financing is not included in this provision. · The Public Housing
Authority makes theappraisal, reviews cost contracts and will accept a
cost figure from a bui Ider without competitive bids. Upon completion,
the project is turned over (turnkey) to the local Housing Authority .
The one requirement under this program stipulates that acquisition and
rehabilitation costs do not exceed 90%. new construction costs.
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1965 HOUSING ACT: Contains new legislation that provides a below
market interest rate (3%) on rehabilitation financing for non-profit
sponsors and Iimi ted profit corporations.
221 (d)3: 1965 Housing Act provision that defines financial methods
available to non-profit sponsors and limited profit corporations.
· The non-profit sponsor category has two provisions:
I) Non-£rofit sponsor who holds property title .
Reha ilitates and continues ownership.
· 2) Builder-Seller who purchases and rehabilitates the property
under an agreement with a non-profit sponsor to purchase
the property upon rehabilitation completion.
221 (d)3 provides a 100% total mortgage (acquisition , reconstruction)
at 3% for 40 years.
221 (d)3 Limited Dividend Sponsor· - Limited to 90% total mortgage at 3%
for 40 years. Investment return on 10% equity is limited to 6%.
221 (d)4 Conventional FHA Financing - Limits sponsors to 90% total
mortgage at 5¼% for 40 years.
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FINANCING METHODS
.,
1965 HOUSING ACT
·Section 221 (D) (3)
LIMITED DIVIDEND SPONSOR
-
Agrees to a 6% return on initial
investment.
Mortgage Terms
-
90% total project cost {land
acquisition-rehabilitation) at 3% for
40 years . *
A limited dividend sponsor must have 10% equity in the total project cost .
. (Example)
·O
Building Purchase Price
Rehabi Ii tat ion Costs
$30,000
170,000
Total Project Costs
$200,000
Final FNMA mortgage at
90% projec~ cost
$180, 000
10% investme nt (equity)
$ 20 , 000
6% re turn on investment
a ll owed under this provision
$ I ~ 200 per year ·


40 year maximum under law . Actual term d~termined by local FHA.


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�FINANCING METHODS
1965 HOUSING ACT
Section 221 (D) (3)
BUILDER-SELLER
-
Bui Ider purchases property with agreement to
sel I property to a non-profit sponsor ofter
property has been rehobi Iitoted.
Mortgage Terms
-
100% total project cost (land ocquisitionrehobil itotion) at 3% for 40 years. *
Assigns 100% mortgage to non-profit sponsor
upon job completion.
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Property. Title
-
Is transferred to non-profit sponsor ofter FHA
final inspection upon job completion .
Invested Monies
-
(Some as non-profit sponsor) .
Mortgage Loon
-
3% interest (below market rote) by FNMA
after FHA insures loon ofter rehobi Ii tot ion
job completion .
100% mortgage is assigned non-profit sponsor.
FNMA reimburses property purchase price.
FNMA reimburses rehabilitation cost.
FNMA reimburses incidental fees .
Construction loon
-
(Some a s no n-profit sponsor)
Fi no l Settl ement
-
(Sa me as no n-profit sponsor)
Upo n fi nol rnortgage sett Iement, property ownership and management is the responsibility of the
non-profit sponsor.


40 year mox.imum under low . Ac tual term determi ned by local FHA .


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FINANCING METHODS
1965 HOUSING ACT
Section 221 (D) (3)
NON-PROFIT SPONSOR
0
Foundation, church, university, etc., incorporated as a non-profit organization.
Mortgage Terms
-
100% total project cost (lal"!d acquisition rehabil itation) at 3% for 40 years. * ·
Property Title
-
Must be held for mortgage term .
Invested Monies
-
Property purchase (FNMA) reimbursed after
(FHA) final inspection upon project completion.
Mortgage Loan
- · .3% interest (below market rate) by FNMA after
FHA insures loan. FNMA mortgage loan made
after final FHA inspection upon job completion.
Construction Loan
-
For actual rehabilitation costs made by private
lending institution to non-profit sponsor as a
temporary loan until final FNMA mortgage loan ·
is closed. The construction loan is made in
timed stages as rehab iii tat ion costs become due .
Construction loan insured by FHA.
Final Mortgage Settlement - · Permanent FNMA mortgage finalized . Pri vate
I ending inst itut ion repaid construction loan by
FNMA.
Final mortgage balance minus constructi o n loan
payment awa rded to non - profit sponsor by FNMA .
(Thi s ba l once covers property purc hase and o ther
fees, e.g~, archite c t , legal ' ·, etc.)
Non-profit sponsor pays mortgage for term set in
mortgage from property rentals.
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40 year maximum under low . Actual term determined by local FHA.


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FINANCING METHODS
1965 HOUSING ACT
Section 221 (D) (4)
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.CONVENTIONAL FHA FINANCING
-
Mortgage Terms
-
For individuals 9r groues who do
not qualify under 221 (D) (3)
provision!;.
90 % total project cost (land
acquisition-rehabilitation) at
. 5¼% for 40 years.*
Al I other 221. (D) (3) financing provisions apply except private lending
institutions lend the monies instead of FNMA.
Under this provision, there is no I imit on amount of return on initial
investment.


40 year maximum under law. Actual term determined by local FHA.


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  1. http://allenarchive.iac.gatech.edu/originals/ahc_CAR_015_022_019_014.pdf

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