Blog - Bedford Lending

HUD Financing + 4% LIHTC Credits Overview

07 Mar 2019 General HUD
We are frequently asked about solving the equity gap in HUD transactions, and the 4% LIHTC / short-term tax exempt bond method is ideal for certain situations. 

Please see the attached document for more information on the structure. 

Synopsis

For HUD affordable new construction and rehabilitation projects, a developer can combine a HUD 221(d)(4) loan with tax credits to typically fund 100% of the development cost. Bedford Lending is the principal contact and coordinates with all parties to ensure an efficient process. BLC has been a direct HUD lender for 25 years and our principals average 30 years’ commercial finance experience. 


The following are the benefits of using HUD with a short-term tax exempt bond:

● Secure investor equity to cover the cash required at closing.
● Secure a Developer’s Fee.
● Cover the escrows HUD requires during construction (i.e. for operating deficits and construction contingencies).
● Qualify for streamlined HUD processing, which typically reduces processing time by up to 2 months.
● Removes combined LTV limits on secondary financing.
● Retain the majority of the project’s yearly cash flow.
● Secure reduced MIP and HUD programmatic processing fees.
● Secure higher HUD leverage (including a smaller vacancy factor) in underwriting.