Guaranteed Rural Rental Housing Program

The program has been designed to increase the supply of affordable multi-family housing through partnerships between RHS and major lending sources, as well as State and local housing finance agencies and bond issuers. Qualified lenders will be authorized to originate, underwrite, and close loans for multi-family housing projects requiring new construction or acquisition with rehabilitation in eligible areas. Guarantees may be used in conjunction with other subsidy programs, such as the Low-Income Housing Tax Credit, HOME, and state rental assistance programs. View a list of New Jersey's eligible areas -- this is a 9 Kb PDF file or determine property eligibility.

Benefits to Lenders

• Provides up to 90 percent guarantee against loan losses
• Allows lenders to underwrite the loan
• Enables lenders to expand their portfolios
• Improves the economic health of rural communities, thereby strengthening the economic prospects of lending institutions that invest in these communities.

Eligible Lenders

• Lenders eligible for approval include FHA, Fannie Mae, and Freddie Mac approved multi-family lenders
• Other lenders with multifamily lending experience may also be approved, such as: Federal Home Loan Bank system members, and State or local Housing Finance Authorities (HFAs).

Lender Responsibilities

• Assume the risk on the nonguaranteed portion of the loan
• Underwrite and originate loans for Agency guarantee
• Perform all loan servicing functions, including asset management and liquidation
• Monitor rent and income levels at the project.

Loan Purposes

• New construction, moderate or substantial rehabilitation
• Acquisition of buildings that meet "special housing needs"
• Combination construction and permanent loans
• Construction of a wide variety of housing types, including mobile homes and congregate housing.

Loan Features

• Loan-to-value (LTV) ratio of 90 percent or less, for loans made to for-profit entities
• 97 percent LTV ratio for loans made to non-profit entities
• Loan size per unit limited to HUD 207 (c) limits.

• Rate must be fixed; cannot exceed rate specified in Notice of Funding Availability (NOFA)
• Each fiscal year, the agency may select projects to receive payment assistance to reduce the agreed upon rate of interest to the Applicable Federal Rate (AFR) based upon priorities established by the agency specified in the Notice of Funding A vailability (NOFA).

• Up to 40 year level payment schedule, or remaining economic life of project.

• Initial fee of 100 basis points, or 1 percent of principal amount; and
• 50 basis points of the outstanding balance, each year thereafter.

Income and Rent Restrictions

• Tenant income cannot exceed 115 percent of area median income, adjusted for family size
• Rent (including tenant-paid utilities) for any unit at initial occupancy cannot exceed 30 percent of 115 percent of adjusted area median income, adjusted for family size
• Average rent (including tenant-paid utilities) for all units in a project cannot exceed 30 percent of 100 percent of area median income.

Eligible Borrowers

• Individuals
• Non-profit or for-profit corporations
• Partnerships
• Limited liability companies
• Trusts
• State and local agencies
• Indian tribes, and any other entity deemed eligible.

Application Process and Competitive Selection Criteria

Applications are processed through the Rural Development Area Offices. The application process and competitive selection criteria are described in the annual Notice of Funding Availability (NOFA) published by the Rural Housing Service.