40-Year Fixed Rate Under 6.00% for HUD-Insured Loan for Start-Up Project

Vintage Realty CompanyOn July 31, 2007, Sims Mortgage Funding, Inc. closed a $23,008,400 HUD-insured loan for Vintage Realty Company. The loan was insured under the Section 221(d)(4) program and was funded through the sale of Government National Mortgage Association (GNMA) mortgage backed securities. The taxable securities have a 40-year fully amortizing term and a fixed rate of interest at 5.99%.

Background

Vintage, based in Shreveport, LA is a regional full-service real estate company that develops and operates multifamily housing projects and manages commercial office and retail space for third-party owners. Vintage owns and manages over 2,000 multifamily units, including a successful 208-unit rental property in Lake Charles, also financed by Sims that was over 95% occupied. There was considerable demand for new units; in response, Vintage optioned a new site and assembled its longstanding development team (architect, engineer and contractor) for the new project.

Challenge

After HUD issued its Firm Commitment for mortgage insurance and Vintage formally acquired the site, the general contractor, who had been approved as part of the underwriting, had to withdraw from the project. Vintage was forced to locate a new contractor, who it turn, had a limited amount of time before the Firm Commitment would expire to familiarize itself with the plans and specifications and to develop its guaranteed maximum price. The Firm Commitment would have to be revised to reflect the new contractor and their price, and the loan would have to close before the Commitment expired.

Implementation

Sims prepared a revised underwriting and financial analysis of the transaction based on the new general contractor and its revised construction budget that was used by HUD to revise the Firm Commitment and to approve the new general contractor on an expedited basis.

Result

Sims abilities to effectively and positively interact with HUD after they initially approved the transaction resulted in the timely issuance of a revised Firm Commitment and approval of a new general contractor. In turn, Vintage was able to close its loan on a timely basis before the Commitment would have expired.