Sponsoring entity must be formed for the sole purpose of owning and operating the project and shall own no other assets unrelated to the project.

Developers may borrow 90% of the HUD or local Housing Authority’s guaranteed purchase price.  No developer fees may be paid from the HMFA loan.

For non-profit developers, the maximum loan amount may not exceed 100% of the total project costs.

For profit-motivated developers, the maximum loan amount may not exceed 90% of the total project costs. The 90/10 ratio of loan amount to project cost must be maintained on a cumulative basis for each construction draw when using HMFA construction financing.

For all loans, whether to non-profit or profit-motivated developers, the HMFA reserves the right to set the actual loan amount in accordance with the HMFA's overall program goals, and determination of acceptable risk. Accordingly, the actual loan amount may be less than the maximum amount permitted above.

The maximum loan term is coterminous with the HUD Turnkey Contract or up to and including two years.

The HMFA will not permit junior financing that begins amortization prior to the payoff of the HMFA construction loan.

Loans with Turnkey Contract will be additionally secured by an assignment of a Turnkey Contract in the amount of 110% of the Agency mortgage. All other loans are secured or collateralized by a first lien on the land and improvements. All means of security must be satisfactory to the HMFA.

When doing staged take-out financing, the bond shall be in an amount sufficient to cover the cost of all site improvements and all phases of a staged take-out development.

The HMFA charges one point origination fee.  In addition, a .5% construction-servicing fee will be charged on each construction draw.

Developers will be responsible for payment of a non-refundable application fee of $2,500 due at the time of the initial application.

The mortgage interest rate is a fixed rate for the term of the mortgage and will be determined based upon the HMFA’s actual cost of funds and allowable spread.  At the earlier of the following:  execution of rate lock,  loan closing, or one week prior to bond  pricing the rate will be locked.  For current rates, you may call the Multi-Family Programs Division or visit our website.

• Site inspection.
• Land valuation - The HMFA recognizes the lesser of the appraised value or the purchase price of the last arms length transaction, as determined by the HMFA.
• Review of construction budget.
• Design review of site plan, buildings, and units.

• Affirmative Housing Marketing Plan NJAC 5:80-22

The HMFA discourages the use of EIFS (Exterior Insulation Finish Systems such as DRYVIT) and electric heating systems.  If the use of either of these systems is contemplated, it must be disclosed at the application stage and written authorization received from the HMFA before engaging professionals to produce Design Development drawings.
Developers are encouraged to make developments as energy efficient as possible by utilizing the standards provided in the DOE/EPA’s Energy Star Program Guidelines.  "Green" design is also strongly encouraged.

For substantial (gut) rehabilitation projects, a structural engineering report on the existing structure, acceptable to the HMFA, must be submitted.  All existing mechanical, plumbing and electric systems must be replaced.
If the degree of rehabilitation to be accomplished is less than substantial, an engineer's report describing the condition of these building systems, and listing their recommendations, must be submitted.  The HMFA's GUIDELINES AND CHECKLIST FOR ASSESSING EXISTING BUILDING SYSTEMS describes issues and offers recommendations to follow in preparing this report.
In senior citizen buildings the following items are to be installed:

• Emergency pull cords in bathrooms and bedrooms.
• A grab bar to facilitate entering and exiting a bathtub or shower.
• Handrails on both sides of common corridors.
• An emergency generator serving common areas and elevators.
• A trash chute and compactor.

Sales of materials or supplies to housing sponsor utilizing HMFA construction financing are exempt from NJ State Sales tax.  Sales of materials or supplies to contractors for the purpose of erecting housing projects which have received HMFA construction financing and other local, state or federal subsidies are exempt from NJ State sales tax.

A Preliminary Assessment Report as described in N.J.A.C. 7:26E-3.2 is required.  Additional assessments such as a Site Investigation described in N.J.A.C. 7:26E-3.3 et seq., or DEP environmental remediation measures may also be warranted.  Rehabilitation projects must provide a plan for asbestos removal and remediation of lead-based point and radon.  A letter of “no further action” from DEP may be required.

A transaction update from the consultant, indicating that no further pollutants have been introduced to the site will be required on all assessments or investigations prepared more than six months prior to construction start.

Contractor

• 100% payment and performance bond
• General liability
• Workmen's compensation
• Contractor's public liability in the sum of $1,000,000/$3,000,000 and property insurance of $250,000/$500,000

Architect

Architects must have, Errors & Omission Insurance of 10% of the construction costs or $250,000, whichever is greater.

*All bonding companies must be rated with an A.M. Best Rating of B+ or better.

The development budget must include funding for insurance, and real estate taxes for the term of the HMFA mortgage.  The escrows are to be funded at the time of loan closing.

The contingency may be used to cover increases in both hard and soft costs.

The budgeted contingency for new construction projects is 5% of the construction costs.

The contingency for rehabilitation projects is 10% of the construction costs.  This may be adjusted based upon an acceptable engineering report submitted to the HMFA.  The budgeted contingency for soft costs must be at a minimum of 1% of the budgeted expenses.