HUD published a Notice in the Federal Register on September 26, 2013, clarifying that conventional or FHA-insured projects with existing LIHTC’s, and other affordable projects that meet LIHTC affordability criteria are eligible for the LIHTC Mortgage Insurance Premium (MIP) rate. This includes tax credit projects with FY2014-insured loans.
The Notice confirms that the 2014 MIPs are the same as the 2013 MIPs, published in the Federal Register on August 15, 2012.
The eligibility of projects with existing tax credits is intended to support the preservation of already-operating affordable housing for low-income renters.
Eligible projects with “existing” LIHTCs must meet the following criteria of affordability consistent with guidance already provided by HUD in Mortgagee Letter 2010-21:
- Projects that have a recorded regulatory agreement in effect for at least 15 years after final endorsement and monitored by a competent public authority;
- Projects that meet at the least the minimum project restrictions under the LIHTC program (i.e., the 20/50 or 40/60 minimum set-aside with rents on those units no greater than permitted LIHTC rents); and
- Mixed income projects if the minimum low-income unit rent, occupancy restrictions and regulatory agreement meet the above criteria.
Loans with other affordability requirements, i.e., not LIHTC or Project-Based Section 8, may also be eligible for the LIHTC MIP rate, provided the affordability requirements are equivalent to all of the criteria described above for “existing” LIHTCs.
This benefit for LIHTC properties equates to a reduction in MIP of up to 50 basis points, depending on the type of housing.