BiggerPockets

Can you tell me how this is possible? I work with HUD all the time and their guidelines clearly state that the max CLTV is 92.5%.

This is directly from my lender's guidelines:
Subordinate Financing: Secondary financing is permitted by HUD.The aggregate amount of the FHA insured first mortgage and the second mortgage cannot exceed 92.5% of the appraised value of the project.

Can you enlighten me?

I'm a commercial broker and lend in all states.
While I appreciate the offer, I'll stick with my lender who has over 25+ years experience with HUD.
Given the cost of not only time, but money as well, in securing a HUD loan, I'm a little concerned with your "test" the waters approach.

I'm only try to help educate you so take it as you wish, but you are going to be judged be what you offer here and claiming LTVs of 100% financing is going to bring scrutiny.
HUD is not different from lender to lender. It's universal so I don't see how someone can structure a loan differently no matter where they are since it either goes to the Washington DC processing center or Seattle, WA. The lender, and HUD, structure the loan, not the broker and the cap is 92.5%CLTV under the 223(f) program. There is some leeway with the 7.5% second (if it will be a true 2nd or a mezz loan) but that's about it.
If you aren't aware of the process works, you have to send in some qualifying paperwork (about 14 items) to the lender who drafts up a detailed loan analysis that's quite lengthy. That is the premise for the loan which leaves very little room for brainstorming on anyone's end.
If someone else has different real world experience please correct me if I'm wrong and I will gladly learn from this too.

It appears that Darryl has his facts together and this post was just another solicitation for an empty promise with no real delivery.

Lee, I believe I now understand your intent of your original post. It was to ask people to speak with brokers and determine if there was a way to use 223f financing to achieve 100% financing. And then to report back on what they had found so we could compile a list of the situations and parameters where 100% financing using this program was possible.

Your first sentenance, though:

In some circumstances HUD 223F is able to do 100% financing.

very much sounds like you are stating that 100% financing is possible, and leads the reader to believe you know how to do this. When I first read this post, the first sentenance led me to the mental assumption that you did know how to do this, and were going to tell us. Reading the rest of the post just left me confused. The message I took from the rest of the post was "go to your brokers with your deals and they will be able to make this work for you, too."

Since we're discussing how this went off the rails, let me suggest that a first sentenance like:

I have been led to understand that in some circumstances it is possible to use HUD 223F to do 100% financing. Has anyone seen any evidence this is true.

That makes it clear you're asking a question about this, not a statement.

This is a forum, not a wiki. Posters here make statements, then others react to them. On a wiki, which I have used extensively, the goal is different. It is to work collaboratively to produce a final product that reflects everyone's knowledge and that factually covers a topic. Even on a wiki, throwing out something as a statement when its really a question can lead to misunderstanding and confusion.

So, assuming the question really "Is it possible to achieve 100% financing with 223f financing?", we can continue the discussion from there. So far the responses seem to be no, that's not possible under any circumstances.

Lee I believe Josh sets this up because people have abused the system in the past hence the reason you can't delete threads or edit threads after the 10 minute mark.

I hate having to answer the question in a positive manner, as it creates a wrong mindset with many wannabees and tire kickers.
But here is the quick and dirty for those who will know how to benefit from this.

In some cases with New Construction and situations where a distressed property is purchased below FMV while needing substantial rehab, you will find that you can have a Loan scenario that reaches 100% or even more. As a specialist in the field and in the normal course of business I regularly place these Loans with my special Lenders.
Having said that, this is not a right for everyone to claim.

These so-called HUD loans are NON-recourse, but the Lender (the Bank) will most certainly look at the investor to gauge his experience and financial standing. Your strength, experience as well as the recommendation of your experienced Broker in good standing will determine whether the Bank is willing to grant such an exceptionally high leverage Loan.

In first instance the Bank will judge the Broker's underwriting on its own criteria, as in the end this loan will stay on the books of the Bank (not HUD).
If their due diligence confirms the positive information as presented, they will submit the package to HUD who will then on their own start the process from scratch to verify what the Bank presents.
If in the end HUD agrees with the Bank (and indirectly with your Broker who stuck his neck out), a closing date is determined, and FHA will proceed to guarantee the Loan to the Bank.

So yes, these are truly the Rolls Royces among Loans, but they take several months to close.
You have to know your stuff to be able to negotiate such a long closing with the Seller.
Experienced investors have no problem with all the LOIs, contracts, bureaucratic procedures and forms, because it just does not get any better for the Pros. But if you're relatively new to the field, and have no financial strength whatsoever or experience in multifamily, you will not get access to these high leverages.

So Lee is correct in saying it is indeed possible. But this playing field is for the Pros.
Hope this cleared up some of the misunderstandings on the subject.

Louis :cool: