pairable program

The PAIRABLE Program provides a forward commitment for a CHFA Risk Share permanent loan at the time of construction loan closing. CHFA issues the Private Activity Bonds needed by the project and a bank partner of the sponsor’s choosing provides a construction loan to collateralize the bonds during construction.

With each construction draw, the construction lender administers the draw and funds the draw amount into a collateral account. At the same time, an identical amount of funds from the bond trust account is provided to the project to pay the draw. At the end of construction and at the time of conversion, the funds in the collateral account pay back the construction loan and the CHFA Risk Share perm loan begins amortizing.

The HFA/HUD 542(c) Risk Sharing program is an FHA mortgage insurance tool used by CHFA and other housing finance agencies to provide credit enhancement to mortgages of multifamily affordable housing projects. CHFA originates, underwrites, processes, and services the loans to projects that include new construction, substantial rehabilitation, and refinance. CHFA and HUD share 50/50 in the risk of loss of the mortgage in the event of an insurance claim. The Risk Share credit enhancement provides full FHA mortgage insurance to enhance CHFA’s bonds and allows CHFA to borrow at more favorable rates in the capital markets.

Under the Risk Sharing program, CHFA serves as the originator, underwriter, processor, and servicer of the Risk Share loan. Because CHFA is the underwriter in lieu of HUD, the process and time to obtain a HUD firm approval for the FHA insurance is significantly streamlined. HUD still requires a NEPA environmental review, completion of the 2530 process, and the Affirmative Fair Housing Marketing Plan, and CHFA reviews the loan due diligence items to underwrite the loan. Typically, a PAIRABLE loan takes 120 to 180 days from receipt of a complete loan application to construction loan closing.

This is true only if Risk Share mortgage insurance is utilized during the construction phase. Under the PAIRABLE Program, no Davis Bacon is required because the bank providing the construction loan to cash collateralize the bonds is administering the construction loan and Risk Share insurance is not in place until the permanent phase. Other financing in the project may require Davis Bacon wages; however, please check the requirements of your other funding sources carefully.

Yes, the interest on the bonds is due during the construction phase in addition to the construction loan interest. However, a portion of the bond interest provides additional tax credit basis to the project, which will provide more tax credit equity to the transaction. Consult with your Legal and accounting professionals for more information.

​CHFA requires an operating reserve sized to 6 months of underwritten operating expenses and debt service. Replacement Reserve deposits and tax/insurance escrows are required once the project converts to the permanent period. For new construction projects, the minimum Replacement Reserve deposit is $250 per unit per year for senior properties, $300 per unit per year for family properties, and $350 per unit per year for permanent supportive housing properties. For acquisition/rehab properties, the corresponding reserves minimums would be increased by $50 per unit per year.