The new Express Lane opens faster processing to more projects, lowers upfront tax credit equity requirements, and maintains a 30-day firm commitment target.
The U.S. Department of Housing and Urban Development (HUD) is giving experienced affordable housing developers a path to expedited FHA construction financing on tax credit deals. Through Mortgagee Letter 2026-13, HUD has introduced the LIHTC Express Lane for Section 221(d)(4) new construction loans.
The Express Lane builds on the 2019 LIHTC Pilot, which remains available, while removing several restrictions that kept projects from qualifying for faster review.
“We’re excited to see HUD address several of the hurdles developers have faced in pursuing FHA construction financing,” said Paul Weissman, head of affordable housing production at Lument. “These changes will help developers secure financing faster in a market where timing matters more than ever.”
Here’s what changes for developers:
More Projects Can Qualify. The Express Lane is available to new construction projects with LIHTC-restricted rents, including both 9% developments and 4% projects financed with tax-exempt bonds. The latter were excluded from the 2019 Pilot program. There is no cap on loan amount or number of units, although properties with Section 8 project-based rental assistance are not eligible. Borrowers active in LIHTC transactions that submit under HUD’s prior credit approval process are deemed eligible for the Express Lane, reflecting HUD’s prior review of them as low-risk, high-capacity partners with established track records.
More Financing Flexibility. Qualifying projects can use the standard maximum 80% loan-to-cost, up from the Pilot’s 65%-75% limits, subject to FHA underwriting and loan-sizing requirements. Developers also no longer need to defer at least 25% of their fee. Together, these changes give developers more options for assembling their capital stack.
Less Capital Required Upfront. The initial LIHTC pay-in requirement drops from 20% – split between 10% equity and 10% equity bridge loan funding – to 10%, entirely in equity. That reduces the capital developers need to have in place at initial endorsement.
Faster Review and Earlier Legal Input. HUD maintains its 30-day firm commitment decision target for applications accepted for processing. Required concept meetings receive priority scheduling, and fewer deliverables are required before app submission. The initiative also streamlines submission requirements for final construction documents. HUD will defer final plans, specs, and third-party architecture, engineering and cost reports until 15 days before closing rather than requiring them at application, allowing FHA underwriting to move forward while final construction documentation is being completed and coordinated with other funding sources. Complex transaction documents can also receive legal review during application processing, helping teams address potential closing issues earlier.
Fewer Environmental Restrictions. More projects may qualify for expedited environmental review except for those with noise above 75 decibels or contamination above residential standards if there’s no regulator-approved cleanup plan. HUD may also direct projects needing extended environmental consultation, analysis, or mitigation to standard processing.
The Express Lane is intended for developers with a strong track record and the financial resources to deliver. Principals generally must have developed and stabilized at least three LIHTC communities within the past five years, including one comparable in size and scope. Financial strength and portfolio performance also matter, and contractors, architects, and management agents must meet their own experience requirements. Prior HUD experience is helpful but not required for the developer/owner; separate FHA experience requirements apply to contractors and architects.
For experienced developers, the changes could make FHA construction financing a more practical option for their next LIHTC project. Lument’s team can help determine whether a project qualifies and what the Express Lane could mean for its financing and timeline.
Contact Lument’s Affordable Housing team to discuss whether the LIHTC Express Lane may be appropriate for your next development.
