If you are working from a 221(d)(4) summary written before 2025, close to every sizing input in it is wrong. Not subtly wrong: the debt service coverage requirement, the loan-to-cost ceiling and the mortgage insurance premium have all moved, each in the direction of a larger loan. Here is what actually applies.
The mortgage insurance premium is now a flat 0.25%
Effective 1 October 2025, HUD reduced the MIP to 0.25% upfront and 0.25% annual across every FHA multifamily insurance program. It applies to applications submitted or amended on or after that date, so long as the loan has not reached initial endorsement.
For a market-rate 221(d)(4), that is a drop from 65 basis points to 25 — a 40 basis point reduction in annual cost that sits inside debt service and therefore inside the coverage test.
The same notice eliminated the three reduced-rate categories created in 2016: Green and Energy Efficient Housing, Affordable Housing, and Broadly Affordable Housing. HUD described them as economically obsolete, because the new uniform rate is at or below what any of them offered.
Coverage and loan-to-cost both loosened
Mortgagee Letter 2025-03, issued 8 January 2025, revised the ratios for new construction and substantial rehabilitation. It took effect immediately for any application not yet at initial endorsement.
| Category | Previous | Current |
|---|---|---|
| Market rate, or LIHTC without rent advantage | 85% LTC · 1.176x | 87% LTC · 1.15x |
| Affordable — LIHTC with rent advantage to market | 87% LTC · 1.15x | 90% LTC · 1.11x |
| 90% or more of units with rental assistance | 90% LTC · 1.11x | 90% LTC · 1.11x (unchanged) |
The affordable category moved on both dimensions at once, which is why the effect there is largest. A project that was tested at 87% of cost and 1.15x coverage is now tested at 90% and 1.11x.
The mortgagee letter does not reach Section 232 healthcare or Section 542 Risk Share. It also states that MAP Guide Chapter 3 will be revised to incorporate the changes — meaning the printed ratios in the Guide are stale, and the mortgagee letter is the operative citation until a new edition issues.
There is now a middle-income tier
Mortgagee Letter 2026-01, issued 22 January 2026, created a middle-income option for 221(d)(4). It supersedes ML 2025-02 in full — if you see a citation to 2025-02, it is out of date.
A qualifying project is sized at 90% loan-to-cost and 1.11x coverage, with a 7% vacancy factor, against 87% and 1.15x for market rate. To qualify:
- At least 50% of units serving households at or below 120% of area median income
- Participation in a state, local or Military Rental Partnership program
- A recorded use restriction that survives transfer, with a 10-year minimum term — reducible to five in some circumstances
Notably, no rent advantage analysis is required. That is the procedural difference from the LIHTC affordable category, where demonstrating a rent advantage to market is part of qualifying. The tier does not apply to Sections 232, 220, 231 or Risk Share.
What else moved
Mortgagee Letter 2026-05, issued 20 May 2026 and effective retroactively to 1 January 2026, applied the annual indexing:
- Substantial rehabilitation threshold: $20,406 per unit — the $15,000 base adjusted by 2.3% CPI-U. This is the line between a 223(f) and a 221(d)(4), so it matters before anything else does.
- Large loan risk mitigation threshold: $130 million, unchanged — the CPI adjustment did not reach the $5 million increment needed to move it.
- Statutory per-unit mortgage limits and high-cost area percentages were indexed in the same cycle.
Mortgagee Letter 2026-04, issued 4 May 2026, revised several environmental requirements in MAP Guide Chapter 9 — covered separately in our environmental review article.
What has not changed
The 2020 MAP Guide, Handbook 4430.G REV-3, revision dated 19 March 2021, remains the operative guide. A 2024 draft rewrite went to HUD’s policy drafting table with comments closing that October, but only Chapters 1 and 10 were ever posted and it has not been finalized. Anything describing a “2024 MAP Guide” as effective is wrong.
A separate draft mortgagee letter, “Multifamily Improvements for MAP Efficiency,” circulated in February 2026 proposing to extend firm commitment terms from 60 to 90 days, cut the new construction working capital escrow from 4% to 2%, and add a mortgageable construction contingency. It remains a proposal. Do not budget against it.
The practical point
All three sizing changes push the same direction. A market-rate deal underwritten on 2024 assumptions — 1.176x coverage, 85% of cost, 65 basis points of MIP — is being tested against standards materially tighter than the ones HUD now applies. If that deal was rejected on proceeds, it is worth re-running. Our sizing tool uses the current figures.