HUD has announced a major change to its multifamily lending programs: all Mortgage Insurance Premiums (MIPs) will now be set at 25 basis points, the lowest level allowed by statute. This move simplifies financing, reduces costs, and improves deal economics across the board. What HUD’s 25 bps MIP Rate Mean…
Key takeaways:
- HUD is standardizing MIPs at 25 bps for all multifamily programs.
- Previously, MIPs ranged from:
- 65 bps for market-rate deals
- 35 bps for affordable housing
- 25 bps only for “Green MIP” projects
- The new structure eliminates the need for green-certification reporting and ongoing compliance.
- Lower MIPs reduce debt service, which can increase loan proceeds.
- Example impacts:
- ~$1.9M more proceeds on a $40M HUD 223(f) loan
- ~$2.2M more proceeds on a $40M HUD 221(d)(4) loan
- The MIP cut is equivalent to roughly a 43–47 bps interest-rate reduction without changing the note rate.
- HUD’s multifamily portfolio performance supports the change, with historically low delinquency and loss rates.
Why this matters to investors:
- Simpler underwriting and faster timelines.
- More predictable long-term financing.
- Improved cash flow and valuation metrics.
- Expanded access to HUD debt for projects that previously didn’t pencil.