FHA-HFA Risk-Sharing Program for Affordable Multifamily Housing
The FHA-HFA Risk-Sharing Program (24 CFR Part 266) is a partnership between the Federal Housing Administration and state and local Housing Finance Agencies (HFAs) to insure mortgages on affordable multifamily rental housing. Unlike standard FHA programs where HUD underwrites every loan, this program delegates underwriting authority to qualified HFAs — and in exchange requires the HFA to absorb a share of any default losses from its own reserves. HUD provides partial FHA insurance coverage; the HFA provides the matching risk. The result is FHA-insured financing for affordable rental projects, with local HFA expertise applied to underwriting instead of HUD's national template.
Current Rule (2026)
| Parameter | Value |
|---|---|
| Citation | 24 CFR Part 266 |
| Issuing agency | HUD Office of Housing — Federal Housing Commissioner (FHA) |
| Statutory authority | 12 U.S.C. § 1715z-22 (Section 542(c) of the Housing and Community Development Act of 1992) |
| Last major amendment | 60 FR 35096 (1995) — foundational program rule; periodic administrative updates since |
What This Rule Does
The FHA-HFA Risk-Sharing Program is a partnership between the Federal Housing Administration and state and local Housing Finance Agencies (HFAs) to insure mortgages on affordable multifamily rental housing. Unlike standard FHA multifamily programs where FHA underwrites every loan itself, the Risk-Sharing Program delegates underwriting authority to qualified HFAs — and in exchange requires the HFA to absorb a share of the risk if a loan defaults. HUD provides partial FHA mortgage insurance; the HFA provides matching risk coverage from its own reserves.
The program addresses a structural gap in affordable housing finance: state HFAs (like the California Housing Finance Agency, New York State Housing Finance Agency, and dozens of similar entities) have deep expertise in local affordable housing markets and borrower relationships that HUD does not. By letting HFAs underwrite using their own standards and sharing the default risk, HUD can deploy FHA insurance more broadly — reaching projects and borrowers who might not qualify under HUD's national underwriting templates — while protecting the FHA insurance fund through the mandatory HFA risk share.
The program is authorized by Section 542(c) of the Housing and Community Development Act of 1992, which directed HUD to develop risk-sharing arrangements with state and local housing finance agencies as a mechanism for expanding insured multifamily lending without requiring HUD to build the underwriting capacity to process every transaction itself.
Key Provisions
- § 266.1 — Scope: the program applies to FHA-insured mortgages on multifamily rental projects that include affordable units; applies only to loans originated and underwritten by HUD-approved HFAs under a signed Risk-Sharing Agreement with HUD
- § 266.15 — Risk-Sharing Agreement: participating HFAs must execute a formal Risk-Sharing Agreement with HUD before any loans can be insured under the program; the agreement specifies the HFA's risk share percentage, reserve requirements, and program compliance obligations; HFAs that underwrite loans without an executed agreement are ineligible for FHA insurance
- § 266.100 — HFA eligibility: to qualify, the HFA must be specifically approved for this program in addition to holding standard HUD mortgagee approval; the HFA must maintain adequate financial and operational capacity; it must have demonstrated experience in multifamily housing finance
- § 266.110 — Reserve requirements: HFAs with an issuer credit rating of "A" or better on general obligation bonds must maintain reserves equal to a percentage of the outstanding insured portfolio; HFAs with lower credit ratings face higher reserve requirements or may be required to establish dedicated trust accounts; the reserve system ensures that when HUD must pay an insurance claim, the HFA can reimburse its risk share
- § 266.115 — Program monitoring: HUD relies heavily on HFA certifications as the primary oversight mechanism; HFAs must submit annual certifications attesting to program compliance and portfolio quality; HUD conducts periodic monitoring reviews of the HFA's underwriting standards, loan quality, and reserve adequacy
- § 266.120 — Sanctions triggers: violations that can trigger sanctions include fraud or material misrepresentation, failure to maintain required reserves, underwriting loans that do not comply with program requirements, and failure to properly service or manage insured projects
- § 266.125 — Scope of sanctions: the HUD Designated Office may require the HFA to execute a trust agreement, restrict the HFA's participation to specific program activities, require additional financial reporting, or terminate the HFA's participation in the program
- § 266.130 — Reinsurance: HFAs may obtain reinsurance for their portion of the risk, subject to conditions — neither HUD's nor the HFA's loss exposure may be subordinated through reinsurance; reinsurance cannot reduce reserve or fund balance requirements; this prevents HFAs from offloading their risk back to the market in ways that would leave HUD holding more exposure than intended
How It Affects You
<!-- pria:personalize type="impact" -->If you develop or own affordable multifamily housing: The HFA Risk-Sharing Program is one of several pathways to FHA-insured financing for your project. HFA-insured loans under this program typically carry lower interest rates than conventional multifamily financing — the FHA insurance backing allows lenders to offer better terms — and may have more flexible underwriting than standard HUD programs because the HFA applies its own standards. Contact your state HFA to determine whether they participate in this program and whether your project would qualify. HFA programs typically require some percentage of units to meet affordability requirements (rent and income limits tied to Area Median Income, or AMI).
If you work for a state or local Housing Finance Agency: Your HFA's participation requires a signed Risk-Sharing Agreement, a "A"-rated credit profile (or equivalent reserves), and ongoing compliance with HUD monitoring. The delegation of underwriting authority is valuable — it lets you apply your local market knowledge rather than navigating HUD's national template — but comes with obligation: you absorb a real share of losses if insured loans default. Annual certifications to HUD require your HFA to attest to portfolio quality and reserve adequacy. A poorly underwritten portfolio creates both direct financial risk (insurance claims against your reserves) and program eligibility risk (loss of HFA program access).
If you work in housing policy or affordable housing finance: The Risk-Sharing Program represents the delegated-underwriting model of HUD affordable housing finance — the alternative to HUD running every transaction through its own underwriting process. The program's effectiveness depends on HFA financial strength: a well-capitalized HFA with deep market knowledge can use the program to deploy substantial capital into affordable multifamily, while a financially stressed HFA may have limited capacity to take on additional risk. The program complements the Low Income Housing Tax Credit (LIHTC) market — many Risk-Sharing loans are made to LIHTC-financed projects, with the FHA insurance providing long-term permanent debt and the LIHTC equity providing the capital structure that makes rents affordable.
<!-- /pria:personalize -->Statutory Authority
This rule implements:
- 12 U.S.C. § 1715z-22 (Section 542(c) of the Housing and Community Development Act of 1992) — directed HUD to develop risk-sharing programs with qualified HFAs for FHA-insured multifamily mortgages; established the core framework of delegated underwriting with shared risk
- 42 U.S.C. § 3535(d) — general authority of the HUD Secretary to make rules and regulations necessary to carry out HUD's housing programs
Recent Rulemakings
The foundational rule was published at 60 FR 35096 (1995), implementing Section 542(c). HUD has periodically updated the program through administrative notices and guidance rather than formal rulemaking. The program has operated largely unchanged in structure since its establishment, though participating HFA portfolios and financial conditions vary significantly over time.
Recent Developments
- Affordable housing financing stress (2023–2026): Rising interest rates following the Federal Reserve's 2022–2023 tightening cycle significantly constrained multifamily affordable housing development and refinancing. HFA Risk Sharing loans — typically used to finance low-income housing tax credit (LIHTC) properties — faced higher debt service costs, compressed debt coverage ratios, and reduced new construction feasibility. HUD and HFAs worked to restructure some pipeline transactions to maintain viability.
- Multifamily housing preservation emphasis: HUD has emphasized preservation of existing affordable housing over new construction as a policy priority, given the higher per-unit cost and longer development timeline for ground-up construction. The Risk Sharing program's use for refinancing and rehabilitation of existing Section 8 and LIHTC properties has grown relative to new construction applications. Preservation financing maintains affordable units in areas where replacement construction would be economically infeasible.
- State HFA capacity and administration: The Risk Sharing program's effectiveness depends heavily on participating HFAs' underwriting capacity and market knowledge. Larger HFAs in states like New York, California, and Massachusetts have dedicated multifamily underwriting teams; smaller state HFAs may have limited capacity for complex Risk Sharing transactions. HUD has worked with industry groups (NCSHA — National Council of State Housing Agencies) to develop underwriting guidance and training for HFA staff.
- HUD staffing reductions (2025): DOGE-directed workforce reductions at HUD in 2025 affected HUD's capacity to process Risk Sharing applications, review underwriting submissions, and respond to HFA queries. Processing timelines for new Risk Sharing loan approvals extended as HUD multifamily staff capacity was reduced. HFAs reported delays in receiving HUD responses to underwriting questions and loan endorsement approvals.
Pending Action
HUD's capacity to process Risk Sharing applications is the near-term operational constraint. HFAs with applications in the pipeline should proactively communicate with their HUD Account Executives to establish realistic endorsement timelines given staffing limitations. No major rulemaking revision to the Risk Sharing program structure is currently pending, but HUD's FY2026 budget request and Congressional appropriations will determine program capacity and any fee structure adjustments. HFAs and affordable housing developers should monitor the 119th Congress's appropriations process for HUD's multifamily programs — both direct appropriations and LIHTC-related tax provisions that affect the economics of Risk Sharing-financed properties.