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Risk-Sharing Program

Risk-Sharing Program

The Risk-Sharing Program is a mortgage insurance program that is combined with construction and permanent financing for the creation of multifamily rental housing. Mortgage insurance protects lenders against loss due to default. Under the Risk-Sharing Program, Kentucky Housing Corporation (KHC) and the U.S. Department of Housing and Urban Development "share" the full insurance risk. Only housing finance agencies or other government service entities can make loans insured under the Risk-Sharing Program.

KHC has partnered with HOPE of Kentucky, LLC and the Community Reinvestment Fund, USA to leverage KHC's permanent loan resources to assist qualified projects in obtaining Risk-Sharing loans.

The Risk-Sharing Program assists households at or below 60 percent of the area median income. Eligible applicants include nonprofit and for-profit builders and developers. The rental units are income-restricted based on the requirements of the loan funds used for financing.

Eligible Activities

  • Permanent financing only for projects proposing new construction, substantial rehabilitation (minimum $20,000 per unit) or adaptive reuse of existing buildings.  Projects must have a minimum of 5 units.
  • Construction financing is not permitted.
  • Must be used in conjunction with Low Income Housing Tax Credits (Housing Credits).
  • All multifamily projects must qualify as affordable housing and must constitute a qualified residential rental development.

Financial Requirements

  • Loans are non-recourse and require a first lien position.
  • Maximum 40 year loan term, minimum term 15 years.
  • Interest rates are based on current market conditions and must be locked in after issuance of a conditional commitment and initial reservation of Housing Credits.
  • Upfront and monthly mortgage insurance premiums required.
  • Maximum loan cannot exceed 90 percent of loan-to-value.
  • Must support a minimum 1.25 debt coverage in year 1 and remain at or above 1.0 through year 15.
  • A deed restriction will be enforced on the property for the life of the loan.