On September 23, HUD issued a notice of proposed rulemaking (NPRM) to reduce the mortgage insurance premium (MIP) to 0.25 percent for all FHA multifamily insurance programs. If finalized, the new rule would apply to applications submitted or amended on or after October 1 and not yet initially endorsed  The NPRM would eliminate 2016 MIP rate categories: green and energy efficient housing, affordable housing, and broadly affordable housing, which HUD stated, “have become economically obsolete” and “misaligned with presidential memoranda” directing agencies to shift away from green incentives.

HUD explained that the uniform MIP rate “significantly simplifies cost-benefit analysis considerations used by owners, developers, and lenders,” and is intended to “lower financing cost and expand the supply of rental housing.” The agency cited data showing that only 4 percent of recent loan closings were for market rate properties without green or affordable incentive qualification, indicating “underutilization due to high cost.”

The rule would also eliminate specialized requirements and regulatory riders associated with the eliminated categories. HUD noted that these requirements “were burdensome and resulted in higher overall development costs.” The comment period will be open until October 1.