Forward Starting Swap

When a project has made significant progress toward meeting NJHMFA’s closing requirements, the sponsor can choose to lock in the interest rate via the forward starting swap.  To participate in a forward starting swap, the sponsor would pay an upfront reservation fee based upon the length of time between reservation and closing.

Document Checklist (doc 51 Kb)

For tax-exempt projects and projects financed with Home Express funds, the reservation fees will be half of the above amounts.

The Agency will charge up-front reservation fees based upon the rate lock period ("Forward Period") that may be refundable at closing or applied to the final costs, but would be otherwise non-refundable if the loan does not close.

Swaption

Sponsors can also lock in the interest rate by way of swaption (an option to enter into a swap) once they have obtained mortgage commitments from NJHMFA, but have not met the criteria required for forward starting swap.  To participate in a swaption, the sponsor would pay a nonrefundable, upfront fee.  The closer the lock-in rate is to the current interest rate, the higher the reservation premium will be.

Notes

1. Please note that all rate lock mortgage rate indications provided to sponsors are estimates, based on then-current market conditions.  As such, they are considered preliminary, approximate and are subject to change until all required documentation is completed and received in correct condition, all fees are paid, and the corresponding rate lock trade is executed.
2. All fee and pricing indications shown above and any provided to sponsors are subject to change until the corresponding rate lock trade is executed.
3. The forward starting swap refundable reservation fees shown for tax-exempt rate locks also apply to projects (both Tax-Exempt and Taxable) utilizing Home Express Funds.
4. The forward starting swap reservation fee is not refundable if the project does not close with the mortgage interest rate and mortgage term locked into.
5. Once entered into, the forward starting swap mortgage interest rate is locked and can't be changed.
6. Projects securing an interest rate lock will not have the option of prepaying their respective share of bond costs of issuance.
7. Any interest rate lock product fee paid is not an eligible project cost and will not be advanced by the HMFA out of any subsidy funds that the project is scheduled to receive.
8. Any interest rate lock product fee paid is in addition to and is separate from indemnification fees paid.
9. Rate locks will only be offered during the timeframe which is at least 3 months prior to the anticipated sale/pricing date of the project's related bonds (the bond issue from which the HMFA and the sponsor expect the project to receive bond proceeds-financing).
10. Rate locks will only be offered to projects with a loan amount (long term, permanent 1st mortgage note) of at least $1.5 million.
11. The maximum mortgage term on tax-exempt rate locks (both forward starting swaps and swaptions) is 35 years.  40 year mortgage terms are not available on tax-exempt rate locks.
12. The HMFA reserves the right to limit its exposure to any one sponsor and/or developer.