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SONYMA Mortgage Insurance Fund Credit Enhancement Program


Mortgage Insurance

All mortgages will be insured by the State of New York Mortgage Agency Mortgage Insurance Fund (SONYMA/MIF). HFA will be responsible for securing SONYMA/MIF approval. Eligible properties include those with a mix of market rate and affordable units and those where 100% of the units are occupied by low and moderate income households.

Eligible Properties

Multifamily rental housing properties including acquisition and rehabilitation, and new construction. Financed properties may include assisted living, senior rental housing and state licensed senior housing. Please refer to the HFA Senior Housing Financing Program term sheet for more information on senior housing.

Eligible Borrowers

Single asset entities including general or limited partnerships, corporations, trusts, joint ventures, limited liability companies, and 501(c)(3) corporations. Some of the criteria discussed herein, other than those specifically required by law or statute, may be modified or waived for 501(c)(3) borrowers/sponsors.

Eligible Loans

  • Permanent Financing:
    Loans for permanent financing are funded with the proceeds of bonds issued by HFA. Generally, loans may not be less than $1,000,000 or greater than $20,000,000. Loans in excess of $20,000,000 may be eligible subject to special approval by HFA and SONYMA/MIF.

  • Construction Financing:
    Construction loans must be secured by a letter of credit from a financial institution acceptable to HFA and SONYMA/MIF.

Bond Financing

Loans may be financed with the proceeds of tax-exempt private activity, tax-exempt 501(c)(3), or taxable bonds issued by HFA. All bond financed projects must meet the applicable requirements of the Internal Revenue Code (the Code) as well as those of SONYMA/MIF and entities providing subsidies.

  • Tax-Exempt Private Activity Bonds
    Tax-exempt private activity bonds require an allocation of private activity "volume cap." Volume cap allocations also allow HFA to allocate 4% low income housing tax credits (tax credits) subject to the requirements of Section 42 of the Code.

  • Tax- Exempt 501(c)(3) Bonds
    Tax-exempt 501(c)(3) bonds are tax-exempt bonds available to qualifying 501(c)(3) organizations based on their tax-exempt status. The bonds do not require an allocation of private activity volume cap and do not include tax credits. Qualifying entities must have a determination letter from the Internal Revenue Service regarding 501(c)(3) status.

  • Taxable Bonds
    Taxable bonds are available to for-profit and not-for-profit organizations and do not require an allocation of private activity volume cap. Taxable bonds may be used with 9% or 4% tax credits, both of which require a separate allocation.

To be eligible for SONYMA/MIF credit enhancement all acquisition and rehabilitation projects financed with any of the bond types mentioned must include a minimum of 20% of the loan amount for rehabilitation costs. This requirement exceeds the threshold in the Code, which requires that a minimum of 15% of a loan made with the proceeds of tax-exempt private activity bonds be used for rehabilitation costs.

Affordability Requirements

All HFA financed and SONYMA/MIF insured projects must provide housing affordable to low, moderate or middle income people as follows:

Tax-exempt private activity bond and/or tax credit financed projects must meet the income targeting requirements of Sections 142 and/or 42 of the Code: (i) 20% or more of the units must be affordable to households whose income is 50% or less of the area median income as determined by HUD, with adjustments for household size or (ii) 40% (25% in New York City) or more of the units must be affordable to households whose income is 60% or less of the area median income as determined by HUD, with adjustments for household size.

Tax-exempt 501(c)(3) bond financed projects must also meet the affordability requirements of the Code, HFA and SONYMA/MIF.

Taxable bond financed projects must also include affordable units as required by HFA and SONYMA/MIF.

Loan Amount

The loan amount is limited to the lesser of 80% loan- to- value or 90% loan-to-cost based on valuation and cost as determined by HFA and SONYMA/MIF. These determinations may be based on an independent third party appraisal and other information available to HFA and SONYMA/MIF.

Debt Coverage Ratio

Minimum income to expense ratio of 1.05:1.00. Income is defined as effective gross income (EGI) and expenses include all operating expenses and debt service.

Loan Term

Maximum permanent loan term of 30 years. Loans may include an additional 1-3 years for construction.


Fixed rate loans with level debt amortization coterminous with the loan term. Amortization may be adjusted at the discretion of HFA and SONYMA/MIF in accordance with the terms of any local tax abatements.


All loans are non-recourse.

Loan Prepayment

Prepayment of the mortgage loan is subject to bond requirements and is generally not permitted for ten years.

Minimum Occupancy Requirement

Occupancy must be maintained at levels such that 90% of pro forma effective gross revenue is achieved for a minimum of three consecutive months prior to permanent loan funding.

Replacement Reserve Requirement

Minimum Replacement Reserve of $250 per unit/year on new construction and rehabilitation projects. For rehabilitated properties the Replacement Reserve amount may be adjusted based on an independent Physical Needs Assessment. In addition, an up-front deposit to the Replacement Reserve may be required for rehabilitation projects.

Operating Deficit Security

Operating deficit security in the form of cash or letter of credit in an amount determined by HFA and/or SONYMA/MIF may be required.

Equity Requirements

Minimum of 10% of Total Development Cost (TDC). The minimum cash equity requirements are discussed below. HFA defines "cash equity" as equity contributed by the developer in the form of cash available prior to loan funding or as a deferred developer fee. This requirement cannot be fulfilled by an investor entity such as a tax credit investor or an institutional investor. Exceptions to the equity requirements may be provided for projects sponsored by a 501( c )(3) organization.

Developer Fees

For projects in which 100% of the units will be occupied by households whose income is 90% or less of the area median, the maximum developer fee is 15% of the TDC, excluding the developer fee (adjusted TDC). The minimum cash equity requirement from the developer is 4% of TDC, from the developer, which must be in the form of cash available prior to loan funding or as a deferred developer fee.

For mixed income projects, the maximum developer fee is 10% of the adjusted TDC with a minimum cash equity requirement of 2% of TDC, which must be in the form of cash from the developer available prior to loan funding or as a deferred developer fee.

For projects with a financing structure that precludes developers from earning cash flow from operations and provide significantly deeper affordability than required under the Code (precluded projects), the developer fee would be 15% of adjusted TDC with a minimum cash equity requirement from the developer of 2% of TDC, which must be in the form of cash available prior to loan funding or as a deferred developer fee.

Developers of 100% affordable and precluded projects may also choose a 10% maximum developer fee and a 2% minimum cash equity requirement.

The following guidelines apply to developers seeking financing for Acquisition and Rehabilitation loans:

  • The standard HFA developer fee and equity requirements apply to hard and soft costs associated with the project. Regarding the acquisition costs, HFA's standard developer fee applies except that the developer is required to defer 50% of the acquisition portion of the developer fee as an additional equity contribution.

  • For acquisition/rehabilitation transactions, if the acquisition is through a related party, the standard HFA developer fee will apply to the rehabilitation costs. Regarding the acquisition costs, HFA's standard developer fee would apply but the developer is required to defer 75% of the acquisition-based developer fee as an additional equity contribution.

Adjustments may be made to the developer fee and the amount of the fee that may be financed with tax-exempt private activity bonds may be limited if there is an identity of interest between the general contractor and the developer.

No developer fee is allowed for a project refunding/refinancing.

Borrower Liquidity

Requirements Net current assets (current assets minus current liabilities) of key principals shall be equal to at least 10% of the mortgage amount. Higher net current asset levels may be required for borrowers with excessive long term liabilities.

General Terms and Conditions


HFA contracts directly for independent appraisals or it may rely on an independent appraisal prepared on behalf of the credit enhancer.

Environmental and Historical Review

All projects are subject to review under the State Environmental Quality Review Act (SEQRA), an Environmental Audit Report by an independent environmental/engineering consultant selected by HFA and review by the New York State Historic Preservation Office (SHPO).

Low Income Housing Tax Credits

Applicants can apply to HFA for tax credits as part of the mortgage loan application process. Any project financed with tax credits must comply fully with the requirements of Section 42 of the Code, including rehabilitation requirements for acquisition and rehabilitation projects.

If tax credits are to be syndicated, an executed syndication agreement must be submitted and reviewed by HFA prior to issuing bonds.

Subsidy Layering Review

The U. S. Department of Housing and Urban Development (HUD) requires that a Subsidy Layering Review (SLR) be conducted for all projects receiving government subsidies, in addition to HUD assistance, to ensure that a project does not receive excessive public funds. Such assistance includes, but is not limited to, low income housing tax credits. The SLR may be conducted by HFA or HUD.

Subordinate Financing

Subordinate mortgages, payable out of surplus cash flow, may be permitted with the prior approval of HFA.

Additional Subsidies

Subsidies in the form of gap financing may be available from HFA.

Public Hearing

A public hearing, as required under the Tax Equity and Fiscal Responsibility Act (TEFRA) must be held for any project to be financed with tax-exempt private activity or tax-exempt 501(c)(3) bonds.

Public Authorities Control Board

All bond financings must be approved by the New York State Public Authorities Control Board (PACB). HFA is responsible for submitting material to PACB.

Declaration of Official Intent

The issuance of a Declaration of Official Intent (DOI) is specifically for the purpose of qualifying eligible project costs for eventual reimbursement with tax-exempt private activity bond proceeds. Treasury regulations require that a DOI only be adopted if HFA has "a reasonable expectation" that the project will be financed. However, a DOI does not constitute HFA authorization for financing a project, nor does it indicate that HFA requirements for financing have been met.

Treasury regulations provide for a 501(c)(3) sponsor to adopt its own DOI to qualify costs for tax-exempt 501(c)(3) financing. However, HFA requires that it review and approve the DOI.

Conditional Commitment

A Conditional Commitment letter will be issued upon approval from the Agency's Credit Committee. Prior to approval by the Credit Committee, a project must meet all applicable underwriting and financing criteria as required by HFA, the Code, the SONYMA/MIF Credit Enhancement Program and all subsidy providers.

Addenda to the Commitment letter will address Affirmative Fair Housing, Equal Employment Opportunity (EEO), and Minority Business Enterprise (MBE)/ Women-owned Business Enterprise (WBE) requirements.

Regulatory Agreement

Borrowers will be required to enter into a Regulatory Agreement to ensure compliance with HFA policy and the Code. The Regulatory Agreement must be executed prior to the issuance of the bonds.

Requirements imposed by other loan and subsidy providers must be consistent with the HFA Regulatory Agreement.

Financing Costs and Fees

HFA Application Fee

For mortgage amount:

Mortgage Amount Application Fee
$25,000,000 or less: $15,000
More than $25,000,000: $45,000

For all entities, the Application Fee is due upon HFA's receipt of a full application.


Application Fee 0.10% of the mortgage amount.

Mortgage Origination Fee

1.0% of the mortgage amount with 0.50% due at mortgage commitment and 0.50% due at bond closing.

New York State Bond Issuance Fee

For principal amount of bonds issued:

From To Issuance Fee
$1,000,000 $5,000,000 0.336%
$5,000,001 $10,000,000 0.504%
$10,000,001 $20,000,000 0.672%

Bond Underwriter Fee

Fee varies with the size of the transaction but generally ranges from 1.25%- 2.0% of the bond amount.

SONYMA/MIF Mortgage Insurance Premium

The borrower must pay the first annual Mortgage Insurance Premium (MIP) in an amount of 0.50% of the mortgage loan at mortgage funding. The ongoing MIP will be paid monthly based on 0.50% of the outstanding principal balance of the mortgage loan as of each anniversary date of the loan.

Principal and Interest Reserve

A maximum of two months of principal and interest to be funded by the borrower at mortgage closing.

Financial Advisor's Fee

Fixed Rate Bonds/Variable Rate Bonds:

Bond Amount Fee
$20,000,000 or less $10,000
Greater than $20,000,000 $12,500

Interest Rate

The interest rate on the mortgage will be based on the interest rate on the bonds issued by HFA. Bonds credit enhanced by SONYMA/MIF are generally highly rated by nationally recognized rating agencies which results in favorable interest rates. The mortgage interest rate will include a 0.25% HFA servicing fee (based on the original mortgage loan amount) plus the 0.50% MIP.

Negative Arbitrage

The borrower is required to provide a letter of credit to cover negative arbitrage prior to bond closing if bonds are sold prior to funding the permanent loan. The amount of negative arbitrage is based on the bond rate, reinvestment rate and when bond proceeds are advanced. Negative arbitrage applies to fixed rate, take-out financing only.

Permanent Loan Funding Criteria

  • Achievement of minimum occupancy requirement of 90% for three consecutive months (stabilized occupancy) as evidenced by a certified rent roll and leases with a minimum term of one year.

  • Evidence in a form satisfactory to HFA that the minimum income to expense ratio of 1.05:1.00 is met. Income is defined as effective gross income (EGI) and expenses include all operating expenses and debt service.

  • Completion of construction evidenced by a permanent certificate of occupancy (CO) or a temporary certificate of occupancy (TCO) with collateral security adequate to achieve a permanent CO.

  • Evidence that real estate tax abatements or exemptions, if any, are in place for the property.

  • Evidence of compliance with zoning and all applicable building codes.

  • Certification that there have been no adverse changes in the borrower's financial status since the making of the loan commitment.

  • All new construction or substantially rehabilitated projects must be monitored by a construction engineer approved by HFA. Such construction monitor must certify construction or rehabilitation completion to HFA prior to permanent loan funding.

  • Cost certification in a form acceptable to HFA.

  • Funding of tax escrow, insurance escrow, and replacement reserve account at levels required by HFA. Payment of up to two months of principal and interest in advance at permanent loan closing.

  • Project specific due diligence requirements as set forth in the HFA Commitment Letter must also be met.


For further information and an application package please contact:

Leonard Gruenfeld
Assistant Vice President
Multifamily Finance
New York State Housing Finance Agency
641 Lexington Avenue
New York, New York 10022

Tel: (212) 872-0386
Fax: (917) 274-0386

Last updated: 4/3/2013