Wednesday, September 16, 2015

Cathedral Development Group Closes on Refinancing of Seniors Property

 The $44 million refinancing of Westward Ho Apartments, a historic building that once was a premier hotel for the city, includes a Federal Housing Administration (FHA) Sec. 221(d)(4) substantial rehabilitation loan, 9% low-income housing tax credits (LIHTCs), and federal historic tax credits.

Multiple federal, state, and local entities were involved in the loan restructuring, including three Department of Housing and Urban Development offices and the city of Phoenix. The FHA loan was provided through Berkadia Commercial Mortgage, and the LIHTC equity was syndicated through The Richman Group and provided by Bank of the West. Arizona Department of Housing allocated the tax credits.

“What’s unique about this refinancing is that it is for a nationally registered historic structure located in the heart of downtown Phoenix within a quarter of a mile from the nearest light-rail station and close to amenities,” said Robert Gaudreau Jr., president of CDG, in a statement. “Additionally, the facility will offer residents health and social services through a unique partnership with Arizona State University who will occupy the first floor of the Tower building on the property.”

The building opened as a hotel in 1928 and underwent an expansion in 1948 to grow to 600 rooms. The hotel was converted to affordable housing in 1979.

The approximately $14 million rehabilitation will include repairs and upgrades to windows, HVAC equipment, and central plant mechanical and plumbing systems, as well as new cabinets, floors, and fixtures in units.

“Select in-unit improvements will enhance the residents’ living experience and improve the desirability and marketability of the property,” said Gaudreau.

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Monday, September 7, 2015

A risky type of mortgage, back with a twist

Don’t call it a comeback.

Interest-only mortgages got a bad reputation in the aftermath of the housing bust, but they’ve managed to stick around as an option for homebuyers who can meet stricter lending guidelines enacted by the government in recent years.

The loans can lower monthly mortgage payments by letting borrowers put off paying the principal on their loan for several years. When the interest-only period ends, the borrower’s monthly payment spikes as they begin to pay a combination of principal and interest until the loan is paid off.

That monthly payment shock, often accompanied by a higher interest rate on adjustable-rate interest-only loans, is what got many borrowers in trouble a decade ago.

One reason is that many of those borrowers qualified for their loans on the basis of their ability to repay the lower, interest-only payment. When their monthly payment reset higher, many couldn’t keep up.

That’s no longer the case. Now lenders are required to determine whether borrowers qualify for any interest-only loans, or other adjustable-rate mortgages, based on whether they can afford to make the eventual bigger monthly payments that await them once the initial interest-only period ends.

As a result, such interest-only loans now make up only about 0.2 percent of all adjustable-rate mortgages, or ARMs, which account for about 4 percent of all home loans for purchase and refinancing, according to data from CoreLogic.

Use of interest-only mortgages peaked 10 years ago at the height of the housing bubble at around 10 percent of all ARMs.

“The big difference here is interest-only loans are back to being the niche product that they traditionally had been,” said Greg McBride, chief financial analyst at “The go-go days of the housing boom were the exception.”

Still, rising home prices can make interest-only loans a tempting option for borrowers who are interested in a lower mortgage payment and can qualify for such a loan under today’s stricter guidelines.

At least one lender is looking to expand access to interest-only loans to a broader range of homebuyers, not just the affluent buyers who typically take advantage of such loans.

In July, United Wholesale Mortgage began making interest-only home loans through its network of mortgage brokers. The loan program covers mortgages as low as $250,000. That’s just above the U.S. median home price of $236,400.

Even with today’s stricter guidelines aimed at ensuring borrowers can handle interest-only loans, they carry potential financial risks. Here are some things to consider when weighing whether such a loan is right for you:


Interest-only mortgages can come with a fixed or variable interest rate and an initial period when the borrower pays only interest on the loan. That’s usually three, five, seven or 10 years. After the interest-only period, the monthly payment can increase sharply as the borrower begins to also pay down the principal.

In addition, the borrower is left with 20 years to pay off the balance of the loan.


To ensure borrowers can afford an interest-only mortgage, lenders often require large down payments compared to what one can find with a traditional 30-year, fixed-rate home loan backed by the government.

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