HUD Express Lane for LIHTC Developers Targets 30-Day FHA Loan Commitments

The HUD Express Lane for low-income housing tax credit developers is now open: the Department of Housing and Urban Development has launched a LIHTC Express Lane Initiative that trims paperwork, lifts the 200-unit cap and aims to issue firm commitments within 30 days for FHA-insured Section 221(d)(4) new construction loans, according to HUD Mortgagee Letter 2026-13 (HUD) and reporting by Construction Dive.

The letter is addressed to all FHA-approved multifamily mortgagees and is effective immediately, remaining in force until it is amended, superseded or rescinded (HUD). Construction Dive, in a story first published by its sister outlet Multifamily Dive, reported that the mortgagee letter was released on Monday, November 2, 2026 (Construction Dive). For developers, lenders and general contractors who build affordable rental housing with tax credit equity, the change targets one of the most persistent complaints about HUD financing: the time it takes to get from application to closing.

What Happened

Mortgagee Letter 2026-13 is titled “Implementation of the Low-Income Housing Tax Credit (LIHTC) Express Lane Initiative for Multifamily Section 221(d)(4) New Construction Loans.” HUD says the initiative “aims to make FHA financing more efficient by reducing processing times for highly experienced and capable LIHTC developers” (HUD). The letter is signed by Joseph M. Gormley, who is performing the delegable duties of the Assistant Secretary for Housing and FHA Commissioner (HUD).

HUD frames the express lane as a processing initiative to test streamlining, consistent with Executive Order 14394, “Removing Regulatory Barriers To Affordable Home Construction,” signed March 13, 2026 (HUD). The agency’s existing LIHTC 221(d)(4) Pilot, launched in 2019, remains in effect. The express lane modifies that pilot for a different group of borrowers focused on new construction (HUD).

According to the letter and Construction Dive’s summary, the main changes are:

• No unit cap. The earlier pilot limited eligible deals to fewer than 200 units. The express lane eliminates that limit, and HUD says there are no limitations on loan size or the number of units (HUD).
• 4% deals included. New construction financed with 4% tax credits and tax-exempt bonds is now eligible alongside 9% LIHTC deals (Construction Dive).
• Higher leverage. The prior pilot capped loan-to-cost at 65% to 75%. The express lane reverts to the standard 80% loan-to-cost limit (HUD).
• No mandatory deferred fee. The requirement that developers defer 25% of the developer fee is removed (Construction Dive).
• Fewer pre-application deliverables. Up-front submissions are limited to environmental items: Tribal consultation, State Historic Preservation Office review, endangered species review and the eight-step floodplain and wetlands process (HUD).
• A 30-day target. HUD reemphasizes its 30-day timeline for a firm commitment decision (Construction Dive).

HUD did not change how loans are sized. The letter states that the agency maintains its loan sizing and underwriting standards as required by the MAP Guide (HUD).

Who Qualifies for the HUD Express Lane

The express lane is limited to new construction under Section 221(d)(4). Projects must carry LIHTC-restricted rents and cannot include HUD Multifamily Section 8 Project-Based Rental Assistance (Construction Dive). Existing HUD borrowers active in LIHTC under a prior credit approval are deemed eligible, according to the letter (HUD).

The bar for the development team is high, and it reaches the builder and designer as well as the sponsor:

• Developer or owner: at least three LIHTC transactions developed, placed in service and stabilized in the past five years, at least one comparable in size and scope; liquidity of $1 million and net worth of $5 million from the active entity and individual principals, without third-party guarantors; a stabilized LIHTC portfolio with debt service coverage above 1.15 and occupancy above 93%; and a clean HUD record with no Tier 1 or Tier 2 flags, REAC scores above 80 and positive management reviews (HUD).
• General contractor: at least five Section 221(d)(4) and LIHTC projects in the past ten years, working capital above HUD’s 5% standard, and at least five Davis-Bacon projects in ten years (HUD).
• Architect: five Section 221(d)(4) projects designed and supervised in the past ten years (HUD).
• Management agent: currently operating at least five LIHTC-compliant projects at the company level (HUD).

Sites with certain environmental conditions are excluded. Projects are ineligible if noise exceeds 75 decibels or if contamination exceeds unrestricted residential levels without an approved remediation plan. Mitigation plans are required for explosive and flammable hazard risks from aboveground storage tanks and for noise between 65 and 75 decibels (HUD).

How the Process Changes

Beyond eligibility, the letter adjusts the steps between concept and closing. Concept meetings are required, and express lane deals get priority scheduling. Tax credit equity paid in at initial endorsement is limited to 10%. Final plans and architecture and engineering reports are due at least 15 days before closing. A separate review by HUD’s environmental and architectural staff is not required unless requested, and loan committee narratives are abbreviated (HUD). Section IV of the letter also addresses the Insurance Upon Completion option (HUD).

The practical effect is that more of the review shifts to the experience and track record of the team, and less of it to document-by-document checking. That is the trade HUD is making: a narrower group of proven sponsors, contractors and architects in exchange for a faster path.

Where the Idea Came From

The LIHTC express lane is modeled on HUD’s Section 232 Express Lane for residential care and senior housing facilities, which the agency released in July 2025 (Construction Dive). Frank Cassidy, a former FHA commissioner and assistant secretary for housing who helped enact the Section 232 version and is now a senior managing director at Walker & Dunlop, described the reasoning to Construction Dive. “The whole idea is to have HUD move these reviews quickly and expeditiously because these are lower-risk deals,” he said (Construction Dive).

Cassidy said the senior housing version “was a huge success,” which led to the question of doing something similar for multifamily (Construction Dive). He argued that “not every deal needs to go through the same cookie-cutter review process,” and that tax credit deals tend to carry less debt: “these are typically low loan-to-cost deals because there’s so much tax credit equity” (Construction Dive). He added that LIHTC projects are “in HUD’s mission, and it’s bringing new housing supply online” (Construction Dive).

On results from the senior housing program, Cassidy told Construction Dive that from the private side he has seen Section 232 commitments in “like two to three days,” and that he recently “closed two deals in 54 business days from submission to closing, which would have typically been unheard of for HUD” (Construction Dive). Those are his own accounts of the Section 232 program; HUD has not published comparable figures for the new LIHTC lane, which has just opened.

Where Things Stand

The letter took effect immediately on issuance (HUD). As of this writing, the HUD newsroom had not posted a separate press release on the LIHTC express lane; the mortgagee letter is the governing document. The letter names Margaret Lawrence, Deputy Director of the Office of Multifamily Production, as the contact for questions (HUD).

The timing matters for the affordable housing pipeline. National housing production has been uneven this year, and the gap between supply and demand has been documented in reports such as the 4 million home shortfall and the recent drop in September housing starts. Faster federal financing does not change construction costs or interest rates, but it can shorten the carrying period between tax credit awards and a closed construction loan.

Implications for Owners, Developers, Contractors and Subs

Developers and owners. Sponsors with a deep LIHTC track record now have a route to FHA construction financing with 80% loan-to-cost, no unit cap and no forced fee deferral. Larger 4% bond deals, which were outside the earlier pilot, are now inside the lane. Sponsors without three stabilized deals in five years, or without the required liquidity and net worth, will continue through standard processing.

General contractors. The contractor test is specific: five Section 221(d)(4) and LIHTC projects in ten years, five Davis-Bacon projects in ten years, and working capital above HUD’s 5% standard (HUD). Builders who want to be the GC of choice for express lane sponsors should document that history now, including prevailing wage compliance. A GC who does not meet the test could keep a project out of the lane even when the developer qualifies.

Architects and design teams. The five-project Section 221(d)(4) requirement for the architect is just as firm (HUD). Final plans and reports due 15 days before closing also put a premium on design teams that can deliver complete documents early.

Subcontractors and suppliers. Davis-Bacon wage rules continue to apply to these projects, and the experience requirements suggest express lane jobs will go to established, compliance-ready teams. Subs with certified payroll systems and prevailing wage experience are better positioned to bid this work.

Lenders. MAP lenders carry the deals into HUD, and the faster commitment target puts more pressure on lenders to submit clean, complete packages from the first concept meeting.

What to Watch

• Whether HUD meets its 30-day firm commitment goal on the first express lane deals, and whether it publishes processing data.
• How many 4% bond deals use the lane now that tax-exempt bond financing is included.
• Any amendments to the letter, which HUD says remains in effect until amended, superseded or rescinded (HUD).
• Whether the express lane model spreads to other FHA multifamily programs, as it did from Section 232 to Section 221(d)(4).

Bottom Line

The HUD Express Lane for LIHTC developers is a targeted fix. It does not lower underwriting standards or change loan sizing, but it removes the unit cap, opens the door to 4% bond deals, restores 80% leverage and limits up-front paperwork for teams that have done this many times before. For experienced affordable housing sponsors and the contractors and architects who meet HUD’s experience tests, it is a chance to close federal construction financing faster.

Key Questions

What is the HUD LIHTC Express Lane?

The HUD LIHTC Express Lane Initiative, set out in Mortgagee Letter 2026-13, is a faster processing track for FHA-insured Section 221(d)(4) new construction loans on low-income housing tax credit projects led by highly experienced developers (HUD).

Does the HUD Express Lane allow 4% LIHTC deals with tax-exempt bonds?

Yes. Both 4% LIHTC deals financed with tax-exempt bonds and 9% LIHTC deals are eligible for the HUD LIHTC Express Lane, as long as the project has LIHTC-restricted rents and no Section 8 Project-Based Rental Assistance (Construction Dive).

What loan-to-cost limit applies under the LIHTC Express Lane?

The LIHTC Express Lane reverts to the standard 80% loan-to-cost limit, replacing the 65% to 75% maximum used in HUD’s earlier LIHTC 221(d)(4) Pilot (HUD).

What experience does a general contractor need for a HUD Express Lane project?

The general contractor must have completed at least five Section 221(d)(4) and LIHTC projects and at least five Davis-Bacon projects in the past ten years, with working capital above HUD’s 5% standard (HUD).

How fast will HUD process LIHTC Express Lane loans?

HUD’s stated goal for the LIHTC Express Lane is a firm commitment decision within 30 days, and Construction Dive reports the aim is to complete underwriting and closing within that window (Construction Dive).

Related Coverage

• U.S. Housing Supply Gap Widens to 4 Million Homes as New Construction Falls Short of Demand
• September Housing Starts Fall 5.2% to 1.221 Million Annual Rate
• Hochul Affordable Housing Awards: $872M for 2,233 Homes Across New York
• Senior Housing Construction Is at a 13-Year Low, Just as 4 Million More Americans Turn 80

Image credit: Jitendra Verma on Unsplash. Free-license photo used under the Unsplash License; the source articles did not include a usable image.

Sources

• U.S. Department of Housing and Urban Development, “Mortgagee Letter 2026-13: Implementation of the Low-Income Housing Tax Credit (LIHTC) Express Lane Initiative for Multifamily Section 221(d)(4) New Construction Loans,” https://www.hud.gov/sites/default/files/hudclips/documents/HsngML-26-13.pdf
• Construction Dive, “HUD launches ‘express lane’ for LIHTC multifamily construction loans,” https://www.constructiondive.com/news/hud-express-lane-lihtc-multifamily-construction-loans/873694/