Traditional lenders tightened their underwriting criteria almost immediately after the credit collapse, and construction loans were among the hardest hit. Now, the government has decided that may not be a bad idea.HUD recently unveiled its proposed changes to FHA's underwriting of multifamily mortgages. The agency had previously released its planned tweaks to single-family FHA, so the new approach to apartment loans was not unexpected. Carol Galante, Deputy Assistant Secretary for Multifamily Housing, maintained that the move was part of an effort to strengthen the FHA multifamily programs.The changes-namely, to Section 221(d)(4) and 223(f) loans-were necessary due to the rising rate of default for market-rate 221(d)(4) loans, among other factors, Galante stressed. FHA also has a high concentration of properties in the markets with the highest vacancies, she stated, adding that the claims rate has doubled in the past two years to 1.2% in fiscal year 2009, and that figure is expected to double this year.The main changes involve increased oversight of Multifamily Accelerated Processing lenders and borrowers and improvements in credit risk management and processing.Debt service coverage ratios would also be increased for market-rate 221(d)(4) loans and developers would have to come up with twice the working capital escrow (from 2% of the loan amount to 4%). Further, cash-out proceeds would be withheld until the project is completed and stabilized, and most borrowers must be able to prove they can stabilize the property within 18 months of delivery. For MAP lenders looking to fund new construction or LIHTC deals, there will be a new specialty certification that would require them to demonstrate that they are experienced in those areas. (For a full breakdown of all the changes, go here or here.)The details to HUD's plan are still being worked out, and the proposal should be published on the Federal Register soon. But what information has been released has certainly sparked debate among members of the multifamily community about what tighter underwriting conditions could mean for the availability of FHA financing, which has basically become the only source of construction funds in the industry since the credit crash.