DCHFA / HUD: Level 1 Risk Share Program
The 542(c) Risk Share is a program independent of FHA’s traditional mortgage insurance that provides credit enhancement on HFA originated loans.
- FHA assumes only a portion of the risk, rather than all
- FHA delegates loan processing and asset management functions to the HFA or QPE
- The Risk Sharing Program is entirely affordable production – all projects must qualify as defined in the LIHTC program.
Currently 37 HFAs participate in the 542(c) Program.
Benefits of the Program
- DCHFA – higher bond ratings resulting in lower borrowing costs and savings passed on to borrowers and tenants.
- HUD – reduced risk at the transaction level, increased affordable housing production and significantly reduced staff resources.
- Borrower – lower cost of capital.
Eligibility & Requirements
Nonprofit, for-profit and 501(c)(3) developers can access tax-exempt, taxable and 501(c)(3) bonds for the following eligible uses:
- Acquisition, construction, and permanent loans
- Fixed and variable rate loans
- Rated and un-rated tax-exempt and taxable bond financing
- Credit enhanced or un-enhanced financing, including financing under FHA Multifamily Insurance Programs, DCHFA-HUD Risk Sharing Program, Fannie Mae, Freddie Mac, DUS lending and Letter of Credit
The DCHFA’s financing can be used to rehabilitate or construct:
- Rental housing (affordable, mixed-income, market rate)
- Cooperatives (Limited Equity)
- Elderly housing
- Assisted-living facilities
- Transitional housing
Federal regulations require that developers/sponsors who utilize MMRB financing which is funded through the sale of tax-exempt private activity bonds do one of the following:
- Set aside at least 20% of their units for individuals or families earning at or below 50% of the area median income (AMI)
- Set aside at least 40% of their units for individuals or families earning at or below 60% of AMI adjusted for family size
Apply for the Level 1 Risk Share Program
If you’d like to apply for the DCHFA / HUD: Level 1 Risk Share Program, please review the program guidelines and fill out the application.
Low Income Housing Tax Credit Program (LIHTC)
If a project is approved for multifamily mortgage revenue bond financing through the sale of tax-exempt private activity bonds, then it is eligible to receive 4% Low Income Housing Tax Credits (LIHTC).
The 4% Low Income Housing Tax Credit Program (LIHTC) is a companion financing tool to the Mortgage Revenue Bond Program (MMRB). It finances these MMRBs through the sale of tax-exempt private activity bonds.
LIHTCs can be syndicated to generate part of the required equity a borrower must contribute to the financing, or can be utilized to offset the borrower’s tax payments.