DCHFA / HUD: Level 1 Risk Share Program

The 542(c) Risk Share is a program independent of FHA’s traditional mortgage insurance that provides credit enhancement on HFA originated loans.

  • FHA assumes only a portion of the risk, rather than all
  • FHA delegates loan processing and asset management functions to the HFA or QPE
  • The Risk Sharing Program is entirely affordable production – all projects must qualify as defined in the LIHTC program.

Currently 37 HFAs participate in the 542(c) Program.

Benefits of the Program

  • DCHFA – higher bond ratings resulting in lower borrowing costs and savings passed on to borrowers and tenants.
  • HUD – reduced risk at the transaction level, increased affordable housing production and significantly reduced staff resources.
  • Borrower – lower cost of capital.

Eligibility & Requirements

Program Eligibility

Nonprofit, for-profit and 501(c)(3) developers can access tax-exempt, taxable and 501(c)(3) bonds for the following eligible uses:

  • Acquisition, construction, and permanent loans
  • Fixed and variable rate loans
  • Rated and un-rated tax-exempt and taxable bond financing
  • Credit enhanced or un-enhanced financing, including financing under FHA Multifamily Insurance Programs, DCHFA-HUD Risk Sharing Program, Fannie Mae, Freddie Mac, DUS lending and Letter of Credit

Property Eligibility

The DCHFA’s financing can be used to rehabilitate or construct:

  • Rental housing (affordable, mixed-income, market rate)
  • Cooperatives (Limited Equity)
  • Elderly housing
  • Assisted-living facilities
  • Transitional housing

Program Requirements

Federal regulations require that developers/sponsors who utilize MMRB financing which is funded through the sale of tax-exempt private activity bonds do one of the following:

  • Set aside at least 20% of their units for individuals or families earning at or below 50% of the area median income (AMI)
  • Set aside at least 40% of their units for individuals or families earning at or below 60% of AMI adjusted for family size

Apply for the Level 1 Risk Share Program

If you’d like to apply for the DCHFA / HUD: Level 1 Risk Share Program, please review the program guidelines and fill out the application.

Application Underwriting Guidelines
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