FHA Raises Threshold on Standard Underwriting Eligibility for Large Multifamily Loans

The Federal Housing Administration (FHA) has published Mortgagee Letter 2023-14, Revisions to Large Loan Risk Mitigation MAP Guide Policies, guidance that increases the threshold at which a multifamily loan is considered a Large Loan from $75 million to $120 million.

“We know that borrowers are contending with the dual challenges of increased development costs and meeting the nation’s dire need for more rental housing,” said Assistant Secretary for Housing and Federal Housing Commissioner Julia Gordon. “Anything we can do to prudently alleviate extra steps in obtaining FHA insurance will help all of us meet the housing supply challenges before us.”

This is the first increase in the threshold since 2014, and will enable a greater number of transactions to use standard underwriting processes when submitted for FHA Multifamily insurance. FHA is also announcing today that it will review the threshold on an annual basis, with the possibility of increasing it in $5 million increments if warranted. The changes are designed to simplify underwriting for multifamily housing development without presenting undue risk to FHA, and to provide for regular adjustments to the threshold so it does not unduly lag market changes.

“Revising the threshold, which is almost a decade old, is an important step for us and for the industry,” said Deputy Assistant Secretary for Multifamily Housing Ethan Handelman. “We want stakeholders to be able to rely on FHA-insured financing for a wide variety of multifamily transactions, and without unnecessary barriers.”

FHA’s Large Loan policies contained in its Multifamily Accelerated Processing (MAP) Guide (Section 3.10) include additional requirements for underwriting loans for FHA insurance that exceed the threshold for Large Loans. The additional requirements do not apply to loans below the threshold amount. Today’s Mortgagee Letter includes page revisions to the MAP Guide to reflect the new $120 million threshold and the annual review methodology. FHA’s other requirements in the MAP Guide related to Large Loans remain unchanged.

"The Mortgage Bankers Association (MBA) has long advocated for this move, citing labor and supply shortages, higher construction costs, and the importance of having loan limits that are consistent with economic conditions," said MBA President and CEO Robert D. Broeksmit, CMB. "The increase to the threshold–along with a new method to review it on an annual basis–will help to ensure that HUD multifamily financing is a viable option at all times during the lending cycle. We thank Secretary Fudge, Commissioner Gordon, and the Biden Administration for these positive changes and will continue to work with them, members of Congress, and industry stakeholders on safe and responsible policies that eliminate barriers and increase rental housing supply for all households.”