Mortgage Loan Compliance | Tighter Multifamily Underwriting Standards

The Federal Housing Administration tightened guidelines for multifamily mortgages for the first time in the 40 years it has insured such loans and just months after raising standards for single-family lenders.

Among the new requirements, the FHA is raising debt service coverage ratios and lowering loan-to-value and loan-to-cost ratios. The maximum loan to value on "affordable" rental properties, for example, is being cut to 87% from 90%. The agency is also requiring additional verification of a property's financial performance, an expanded review of the borrower's credit and the prescreening of certain applications to weed out loans that might not make it to closing.

The measures, announced Wednesday, did not surprise some apartment lenders, but they nonetheless did not welcome the news. "We're not surprised by anything nowadays," said Menzo Case, the president and chief executive of Seneca Falls Savings Bank in upstate New York. "It's just another nail in the coffin."

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