The IRR program does have its limitations: loan servicers like Walker & Dunlop can only use the program for existing loans within their servicing portfolios. Also, it is only suited for borrowers that want to get a lower rate, but don't want to take cash out. And by its very nature, as interest rates rise the program will no longer be attractive to refinancers.

The question is – what point will that point in this particular cycle?

The borrower behind the $222 million portfolio couldn't have nailed it better in terms of timing. But that doesn't mean other borrowers won't benefit right now and in the coming months.

However, the window of opportunity may well be a small one, especially if the Fed decides it must act more aggressively than it has signaled in the past.

“As interest rates rise this program becomes less compelling,” for borrowers, Walker & Dunlop SVP Michael Vaughn tells GlobeSt.com. There are also prepayment penalties to factor, which decline over time making the case for refinancing more attractive as each year goes by, Vaughn says.

The portfolio refinancing locked in at various rates depending on the prepays, he said, all in the 3% range.

Right now HUD is at sub 4% which is historically low and most yields aren't sensitive to interest rate increases yet, Vaughn says.

“But if we go up another 50 basis points I think people will want to start locking in everything they have.”

Giusti and Vaughn structured this deal on behalf of the borrower.

WASHINGTON, DC–Following the stellar employment numbers the Labor Department released last week, it is all but a foregone conclusion the Federal Reserve will increase in its target range for the Federal Funds rate to 0.75% to one percent this week. Another two rate increases will happen this year, the Fed has said — or possibly more, given the solid economic reports of late.

There are countless implications and story lines to this move. The one we are discussing today is what this could mean for the US Department of Housing and Urban Development's Interest Rate Reduction (IRR) program.

Walker & Dunlop recently highlighted how useful this program is to interest-rate sensitive investors via a $222 million portfolio refinancing. The borrower was able to secure lower interest rates on 30 existing HUD loans backed by senior living and healthcare properties. And lucky him — he rate-locked on the deal the day before the presidential election, when rates began ticking up. The deal closed in various tranches over the following months with the final transaction completed very recently.

HUD created IRR in 2013 to join the lineup of its existing refinance options. IRR, though, is specifically aimed at existing HUD multifamily borrowers that want to take advantage of low interest rates. The program reduces the mortgage interest rate without affecting the maturity date or other mortgage terms. The point is to lock in a lower rate and increase the properties' cash flow, Walker & Dunlop SVP Kevin Giusti told GlobeSt.com.

The IRR program does have its limitations: loan servicers like Walker & Dunlop can only use the program for existing loans within their servicing portfolios. Also, it is only suited for borrowers that want to get a lower rate, but don't want to take cash out. And by its very nature, as interest rates rise the program will no longer be attractive to refinancers.

The question is – what point will that point in this particular cycle?

The borrower behind the $222 million portfolio couldn't have nailed it better in terms of timing. But that doesn't mean other borrowers won't benefit right now and in the coming months.

However, the window of opportunity may well be a small one, especially if the Fed decides it must act more aggressively than it has signaled in the past.

“As interest rates rise this program becomes less compelling,” for borrowers, Walker & Dunlop SVP Michael Vaughn tells GlobeSt.com. There are also prepayment penalties to factor, which decline over time making the case for refinancing more attractive as each year goes by, Vaughn says.

The portfolio refinancing locked in at various rates depending on the prepays, he said, all in the 3% range.

Right now HUD is at sub 4% which is historically low and most yields aren't sensitive to interest rate increases yet, Vaughn says.

“But if we go up another 50 basis points I think people will want to start locking in everything they have.”

Giusti and Vaughn structured this deal on behalf of the borrower.