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U.S. Department of Housing and Urban Development Revises “Three-Year Rule” for Multifamily Permanent Loan Programs
On March 2nd, 2020, the U.S. Department of Housing and Urban Development (HUD) removed the prior requirement for certificates of occupancy to have been obtained at least three years prior to an application for financing via a HUD loan program (colloquially known as the “three-year rule”).

To apply for HUD financing under the revised policy, the property must achieve the applicable programmatic debt service coverage ratio (DSCR) for at least one full month of operations. HUD will underwrite to actual revenue collected less normalized operating expenses in order to determine if the DSCR is being achieved.

The elimination of the three-year rule coincides with 10-year Treasury rates at historic lows. Borrowers who are interested in refinancing properties with HUD will likely be able to lock in a low fixed-rate for the entire term of the fully amortizing loan, assuming that Treasury rates remain low throughout the remainder of the year. 

HUD’s multifamily loan programs offer many benefits, including:
  1. Up to 35-year term and amortization.
  2. Loan to Value up to 80% for Cash Out/Equity Out Market Rate buildings (or, 85 to 90% if other parameters are met).
  3. Debt Service Coverage as low as 1.176x for market rate buildings (or, 1.15x to 1.11x if other parameters are met).
  4. Davis-Bacon prevailing wage requirements do not apply to acquisition or refinance loans.
  5. Non-recourse.
For more information on HUD’s multifamily loan programs, call Paula Quigley at 410-545-2494.
About M&T Realty Capital Corporation
M&T Realty Capital Corporation® ( is a wholly-owned subsidiary of M&T Bank—one of the 20 largest US-headquartered commercial bank holding companies. As a full-service mortgage banking company, we specialize in providing competitive financing nationwide for commercial real estate. We are a fully accredited Fannie Mae DUS® lender, a Freddie Mac Optigo® lender, an approved FHA/HUD MAP and LEAN lender, and also offer life insurance company and CMBS financing through correspondent relationships. In 2019, we originated $5.2 billion in loans, and currently service a $21 billion portfolio.
 Equal Housing Lender.
All loans and all terms referenced herein are subject to receipt of a complete application, credit approval, and other conditions.
“DUS®” is a registered trademark of Fannie Mae. “Optigo®” is a registered trademarks of Freddie Mac.
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