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March 2009

Gomberg Financial becomes HUD 221d4 Correspondent

Gomberg Financial Services is pleased to announce that as of February of 2009 we have become a correspondent for a HUD Map Lender who has 18 years of experience with HUD loans.  Warren Gomberg brings a wealth of experience to this arena as well. He closed over 100 HUD loans in 1995 and 1996 using the 203K HUD loan program. The 221d4 program, which is used for rehab, is a very attractive program in this environment of low construction cost, even with Bacon-Davis labor restrictions.  This program works especially well on vacant properties.  You can finance up to 90% of all costs, hard and soft.  It’s a straight 40-year fixed mortgage and its non-recourse. Current rates are in the mid 6's.

Program Highlights Include:

Loan Term and Amortization

• Construction loan plus up to 40-year permanent loan   –   40-year Amortization

Maximum Loan Amount

• Determined by the lowest of: a) 90% of eligible development costs (100% for non-profit), b) 1.11 Debt Service Coverage (1.05 for non-profit), c) HUD’s statutory mortgage limits, d) For rehab add 90% of the “as is” value (100% for non-profit) plus 90% of the total development cost (100% for non-profit).

Fixed Rate

• Yes, for both Construction and Permanent.

Eligible Properties

• Multifamily projects to be built or projects undergoing substantial rehabilitation.  Detached structures and row houses eligible.

Eligible Borrowers

• Single Asset Entity (for both profit and non-profit).

Occupancy Requirement

• Underwritten at a maximum 95% occupancy.

Tax and Insurance Escrows

• Monthly deposits required.

Recourse

• Non-recourse for both Construction and Permanent.

Commercial Space

• Maximum 10% of gross floor area and maximum 15% of potential gross income.

Required Reports

• Market Study, Appraisal, Architect/Cost Review and Phase 1 Environmental.

Prepayment

• Negotiable.  Generally three year lockout with declining percentage of principal thereafter up to 10 years (7-6-5-4-3-2-1).

Assumable

• Subject to Lender and HUD approval and payment of assumption fee.

Origination Fee and Good Faith Deposit

• Both these fees are negotiable, based on project type.

Expense Escrow

• Yes, sufficient to cover Lender’s expenses and third-party report costs.

HUD Application Fee

• Non-refundable fee of $3 per $1,000 (0.3%) of the mortgage amount due to HUD with the firm commitment submission package.

HUD Inspection Fee

• 0.5% of the mortgage amount for new construction or 0.5% of the cost of repairs for substantial rehab.

Legal/Closing Fee

• Borrower pays Lender’s counsel fee and miscellaneous closing costs.

Rehabilitation Qualifications

• Repairs must exceed $6,500 per unit (adjusted for local high cost factor), 15% of the “as rehabbed” appraised value or replacement of two or more major building systems.

HUD Mortgage Insurance Premium (MIP)

• HUD sets the cost of the FHA Insurance.  The MIP is paid in advance for the construction period and is escrowed monthly after amortization commences.

Davis Bacon

• Davis Bacon labor standards and wage requirements apply to construction work and rehab work.