The intent of the program is to increase the supply of quality and reasonably priced rental housing for middle-income families. Mortgage insurance reduces the risk for lenders by guaranteeing payment in the event of default, making capital available at lower cost.
Assistance provided is in the form of mortgage insurance.
The Federal Housing Administration insures mortgage loans originated by HUD-approved lenders. To be eligible, the properties must consist of five or more units of detached, semidetached, walkup, or elevator-style rental housing. Generally, a project is eligible for project mortgage insurance if the sponsors can demonstrate that there is a definite market demand, that the project is economically self-sufficient, and that project financing is secure. Section 207 mortgage insurance, although still authorized, is no longer used for new construction or substantial rehabilitation. The program is administered by HUD's Office of Multifamily Housing.