On February 14, 2022, HUD announced that it was terminating the COVID-19 Underwriting Requirements that it instituted in April 2020. These additional underwriting requirements included (i) nine months of debt service reserves, (ii) 250% repair escrows, and (iii) limits on cash-out refinancings. This change allows lenders to return to using standard Multifamily Accelerated Processing (MAP) Guide policies going forward, which require fewer reserve requirements. The guidance is provided in Mortgagee Letter 2022-03, a copy of which can be obtained here: 2022-03hsgml
The guidance is effective for deals closing after February 15, 2022. For deals that closed prior to February 15, 2022 and are maintaining the higher reserves, those deals will need to continue maintaining the reserves as required pursuant to the applicable escrow agreements signed at closing. The termination of the escrows held thereunder will terminate as provided for in those escrow agreements that were executed at closing.
For more information, please contact David Lang.