Within a span of three days at the end of February, Sims Mortgage Funding closed $15.45 million in FHA-insured loans that enabled existing clients to successfully refinance and expand their assisted living and market rate multifamily rental housing projects.

The first closing was for Independence Manor at Hunterdon, a 90-unit assisted living facility located in Flemington, NJ. Proceeds from the new $8,596,700 loan were used to prepay the project's existing FHA-insured loan, which SMF originated in 1999 in connection with the borrower's construction of the project. The refinance loan was insured under the Section 223(a)(7) program and was funded with taxable GNMA mortgage backed securities with a 40 year amortization. The application for mortgage insurance was processed under the Lean program; from submission to HUD approval to closing took approximately 6 months.

Independence Manor

The refinancing was a clear winner for Independence Manor - it reduced its interest rate by 3.35% and will now enjoy approximately $245,000 in annual debt service savings. The Section 223(a)(7) loan was the fifth FHA-insured financing SMF has successfully closed for this client dating back to 1992.

Then it was on to Louisiana, where Sims Mortgage Funding closed a $6,854,400 loan for the Magnolia Trace Apartment Homes, a 208 unit market rate multifamily rental project located in Alexandria. SMF originated a $15,437,700 loan under the Section 221(d)(4) program in 2005 that provided financing for construction of the project. The property achieved sustaining occupancy in July 2007 and has been consistently full ever since. Our client gained control of six acres adjacent to the project and wanted to expand by 96 units, but his financing options were limited: the existing Section 221(d)(4) loan has a low interest rate relative to current market conditions and a high prepayment penalty. As a result, it was economically infeasible to refinance that debt in connection with constructing the addition.

Magnolia Trace

Our solution was to originate a Supplemental Loan, insured under the Section 241 program, to finance the addition; under this program, the primary Section 221(d)(4) loan remains in place and does not have to be prepaid. The Supplemental Loan is secured by a second mortgage on the entire project, not just the addition. The application was processed by the New Orleans HUD Office under its "Traditional Application Processing"(TAP) protocol in approximately five months. The Supplemental Loan was underwritten at 90% of the addition's replacement cost, features an interest rate slightly below 5.25%, has a 40 year amortization and was funded with GNMA taxable mortgage backed securities. Construction is underway and is expected to be completed by November 2011. The Magnolia Trace Supplemental Loan is the ninth FHA-insured financing SMF has successfully closed for this client.