FHA Multifamily Mortgagee Letter 2025-03 — Multifamily Changes in Debt Service Coverage Ratios (DSCR) and Loan to Value/Loan to Cost Ratios (LTV/LTC)
HUD / FHA Multifamily · a multifamily Mortgagee Letter, amending the Multifamily Accelerated Processing (MAP) Guide, HUD 4430.G REV-3 (the 2020 MAP Guide). It does not change the Single Family Housing Policy Handbook 4000.1. Effective 2025-01-08.
FHA Multifamily Mortgagee Letter 2025-03 — Multifamily Changes in Debt Service Coverage Ratios (DSCR) and Loan to Value/Loan to Cost Ratios (LTV/LTC). Full verbatim text, substring-verified against snapshot e98979e34abb354e.
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Verbatim provisions from FHA Multifamily Mortgagee Letter 2025-03 — Multifamily Changes in Debt Service Coverage Ratios (DSCR) and Loan to Value/Loan to Cost Ratios (LTV/LTC) — each quote is a verified substring of the regulator-published source snapshot, not retyped. Quoted for reference; this is not legal advice. The operational layer (P&P updates, prompts) lives in the regulation update kits.
FHA Multifamily Mortgagee Letter 2025-03 — Multifamily Changes in Debt Service Coverage Ratios (DSCR) and Loan to Value/Loan to Cost Ratios (LTV/LTC) — I. Purpose
This Mortgagee Letter (ML) updates the Federal Housing Administration's (FHA’s) Multifamily Housing Programs' underwriting standards and guidelines. It is not applicable to the health care programs administered by the Office of Healthcare Programs (Section 232 or refinancing of Section 232 pursuant to Sections 223 (f) or 223 (a) (7)), nor does it apply to Risk Share (Section 542) loans. These changes are in response to current real estate and financing markets and are intended to stimulate FHA’s countercyclical role while ensuring the continued availability and stability of FHA insurance.
FHA Multifamily Mortgagee Letter 2025-03 — Multifamily Changes in Debt Service Coverage Ratios (DSCR) and Loan to Value/Loan to Cost Ratios (LTV/LTC) — II. Background
As part of the Biden-Harris Administration's commitment to expanding housing supply, both affordable and market rate, FHA is updating its policies to make financing of both existing and new housing units feasible for more properties. This adjustment is in line with trends in the private multifamily market and will enhance housing unit output.
FHA Multifamily Mortgagee Letter 2025-03 — Multifamily Changes in Debt Service Coverage Ratios (DSCR) and Loan to Value/Loan to Cost Ratios (LTV/LTC) — III. Changes in Debt Service Coverage Ratios and Loan to Value Ratios
Under the Multifamily Accelerated Processing Guide (MAP Guide), maximum loan amounts are the lesser of: a) the requested mortgage amount, b) the amount allowed by statutory limits, c) the amount supportable by applicable debt service coverage ratios, or d) the amount supportable by the applicable loan ratios. To help boost housing supply, HUD is revising its underwriting policies. The previous and new debt service coverage ratios (DSCR) and loan to value / loan to cost ratios (LTV/LTC) are listed in the table below: Criteria 3 (Loan to Value/Loan to Cost) Criteria 5 (Debt Service Coverage) Previous New LTV/LTC Previous New DSCR Vacancy Factor 90% or Greater Units with Rental Assistance 221(d)(4)NC/SR 90% No Change 1.11 No Change 3% 223(f) Refinance or Acquisition* 90% No Change 1.11 No Change Affordable Housing (LIHTC w/ Rent Advantage to Market) 221(d)(4) NC/SR 87% 90% 1.15 1.11 5% 223(f) Refinance or Acquisition* 87% 90% 1.15 1.11 Market Rate (or LIHTC w/o Rent Advantage) 221(d)(4) NC/SR 85% 87% 1.176 1.15 7% 223(f) Refinance or Acquisition* 85% 87% 1.176 1.15 *There is no change to the current Criteria 10 loan to value ratio for cash out refinancing, and there is no proposed change in the current vacancy factor underwriting.
FHA Multifamily Mortgagee Letter 2025-03 — Multifamily Changes in Debt Service Coverage Ratios (DSCR) and Loan to Value/Loan to Cost Ratios (LTV/LTC) — IV. Implementation
Changes will be implemented immediately for any application that has not reached initial endorsement. This Mortgagee Letter is effective immediately and remains effective until amended, superseded, or rescinded. MAP Guide Chapter 3 will be revised to incorporate the changes specified in this Mortgagee Letter. Additionally, related MAP Guide cross references will be revised for consistency with the revisions. For questions about this Mortgagee Letter, please contact Margaret Lawrence, Deputy Director, Office of Multifamily Production at [email protected]. The information collection requirements contained in this document have been approved by the Office of Management and Budget (OMB) under the Paperwork Reduction Act of 1995 (44 U.S.C. 3501-3520) and assigned OMB control number 2502-0541. In accordance with the Paperwork Reduction Act, HUD may not conduct or sponsor, and a person is not required to respond to, a collection of information unless the collection displays a currently valid OMB control number.
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