What the 2025 HUD changes mean for 223(f) and 221(d)(4) loans

HUD Mortgagee Letter 2025-03 (January 2025) changed the underwriting boxes for the two main multifamily programs. For market-rate 223(f) purchases and refinances, and for market-rate 221(d)(4) construction and substantial rehabilitation, the maximum is now 87% loan-to-value (loan-to-cost on 221(d)(4)) with a 1.15x minimum debt service coverage ratio.

Projects with affordability restrictions or project-based rental assistance get a more generous box: 90% and 1.11x. A cash-out 223(f) refinance is not part of the increase and stays at 80% loan-to-value.

• Market rate: 87% LTV or LTC, 1.15x DSCR
• Affordable or rental assistance: 90%, 1.11x
• 223(f) cash-out: 80% LTV

A Federal Register notice published on September 23, 2025 set the annual mortgage insurance premium (MIP) for FHA multifamily programs at a flat 0.25% for applications submitted or amended on or after 2025-10-01. It removed the separate green, affordable and broadly affordable categories, so a green certification no longer lowers the premium.

On a $10,000,000 loan at 6.00% over 35 years, the first-year premium is about $24,900, which adds roughly 0.25 percentage points to the note rate in year one. The premium is charged on the average balance, so it falls as the loan amortizes. The HUD MIP calculator shows the full schedule.

The upfront premium is configurable in Corin's assumptions (default 0.25%) because it rests on a secondary source; a HUD lender confirms the figure for a specific application.

Higher leverage helps only when it is the binding constraint, and on many deals it is not. Coverage often binds first: at a typical HUD rate, a property that cannot reach the minimum coverage cannot take more debt just because the loan-to-value limit allows it. Run both tests before assuming the extra leverage is available.

The lower coverage minimum matters most for properties with thin margins, such as older rent-stabilized buildings in California, where in-place rents are below market. There, income, not value, sets the loan.

Section 232 senior housing and healthcare loans were not changed by Mortgagee Letter 2025-03. Corin's assumptions keep 80% loan-to-value and 1.45x coverage for refinances, with annual premiums of 0.65% on refinances and 0.77% on new construction. Whether the flat 0.25% notice reaches Section 232 has not been confirmed, so treat the Section 232 premium as a figure to verify.

HUD processing remains a multi-step lender and HUD review. Timelines vary by lender and HUD office and are not guaranteed.