HUD large loans: the $130 million threshold and what changes above it

The threshold

Period	Threshold	Source
Before mid-2023	$75 million (set in 2014)	ML 2023-14, background
From June 28, 2023	$120 million, indexed annually in $5 million steps, never reduced	ML 2023-14
CY2025	$130 million	ML 2025-11
CY2026	$130 million (2.3% CPI-U did not reach the next $5 million step)	ML 2026-05

A loan “of $130 million and greater” is a large loan. The 2026 threshold applies to applications submitted or amended on or after January 1, 2026 and not yet initially endorsed. The large loan rules do not apply to 223(a)(7) refinances of existing FHA loans.

The large loan ratios

Compare these with the standard ratios that apply below the threshold (87% and 1.15x market rate, 90% and 1.11x affordable since ML 2025-03).

New construction and substantial rehabilitation: 220, 221(d)(4), 231, 241(a)

Property	Minimum DSCR	Maximum LTC/LTV
Market rate, or LIHTC without a rent advantage	1.30x	75%
Affordable	1.25x	80%
90% or more rent assisted	1.15x	87%

Section 241(a) supplemental loans stay limited by statute to 90%.

Purchase or refinance: 223(f)

Property	Minimum DSCR	Maximum LTV, no cash out	Maximum LTV, with cash out
Market rate, or LIHTC without a rent advantage	1.30x	75%	70%
Affordable	1.25x	80%	70%
90% or more rent assisted	1.15x	87%	80%

The cash-out figure is applied at Criterion 10 of form HUD-92264-A.

What the difference means. On a market-rate 223(f), dropping from 87% to 75% LTV takes 12 points of value out of the loan, and moving coverage from 1.15x to 1.30x reduces what the same net operating income can carry by about 11.5%. Whichever test binds, a deal just above $130 million can size to a smaller loan than the same deal would have just below the line, so it is worth modeling both.

Bigger reserves

• New construction and substantial rehab: the minimum operating deficit reserve is the greater of 12 months of amortizing debt service plus MIP, or the amount the standard MAP Guide method produces.
• 223(f) on a property with a certificate of occupancy under three years old: a debt service reserve of the greater of 12 months of principal, interest and MIP or 50% of any cash out. It is released after six consecutive months at the underwritten coverage, counting months before endorsement. If six such months are already achieved before endorsement, no reserve is required.
• HUD can tighten any ratio or reserve further on a case-by-case basis, and lenders are expected to propose risk mitigants.

Net worth and liquidity

For large loans, the principals of the borrowing entity, in aggregate, must have:

• net worth of at least 20% of the loan amount, and
• liquidity of at least 7.5% of the loan amount.

Hypothetical loan	Net worth needed	Liquidity needed
$130,000,000	$26,000,000	$9,750,000
$150,000,000	$30,000,000	$11,250,000
$200,000,000	$40,000,000	$15,000,000

HUD may waive the test for sponsors of subsidized affordable housing. Separately from the large loan rules, principals with more than $500 million of outstanding FHA-insured debt need HUD approval before the lender can submit any new application (MAP Guide 4.3.1.E).

Lease-up

Absorption is still capped at 18 months. A HUD Regional Office Director can waive that only for unusually strong markets and borrowers with recent experience delivering similar projects, and those deals may need larger reserves.

Process

HUD’s processing chapter recommends a concept meeting for large loan refinances, which are otherwise optional for 223(f). On construction deals a concept meeting is already strongly encouraged. HUD can also ask for case-specific mitigants, so build time for that into the timeline.

A caveat on interpretation

Mortgagee Letter 2025-03 raised standard leverage and lowered standard coverage in January 2025 but does not mention large loans. Our reading is that the ML 2023-14 large loan table, which is written as a separate section 3.10 standard, is unchanged. HUD has not published guidance confirming or contradicting that, so confirm the ratios with the lender and the HUD office before relying on them for a specific deal.