If you closed a Texas housing finance corporation (HFC) deal in 2024 or 2025, a public entity already holds the fee under a 99-year lease and your lender is already a leasehold mortgagee. HB 21 removed the exemption that paid for it — and triggered a prepayment covenant with your personal guaranty behind it. Here is the trade that satisfies the covenant without your check.
The traveling HFC structure worked because a housing finance corporation organized outside your county could take fee title, lease the improvements back for 99 years, and carry a property tax exemption with it. Texas House Bill 21, signed 28 May 2025, ended that. Read the statute before you act on this: HB 21 amends Chapter 394 of the Local Government Code, which governs housing finance corporations only. It does not amend Chapter 303 (public facility corporations) or Chapter 392 (housing authorities) — PFCs were reformed separately in the 2023 session. If a PFC or a housing authority holds your fee, HB 21 is not your problem and something else is. What remains is a public entity holding your dirt for a benefit that no longer exists, an operating budget that suddenly carries a full tax line, and in most of these deals a right of first refusal or purchase option that lets the fee come back to the borrower if the issuer declines to keep it.
That option is the door. It is also, in almost every one of these documents, the cheapest asset the borrower owns and the one nobody has looked at since closing.
These loans were sized on the exempt tax line. When the exemption fails, the loan documents generally do not simply reprice — they require a mandatory prepayment down to a stated debt yield or coverage test, commonly somewhere between 1.20× and 1.60× DSCR or an 8% to 11% debt yield, with yield maintenance on top. Critically, in this vintage that obligation is frequently recourse to the guarantor personally. A tax law change in Austin becomes a demand on your balance sheet.
Property performance is usually not the problem. We have looked at these where occupancy sits above 90% and the property still covers, and the covenant trips anyway, because the covenant was written against a tax line that no longer exists.
We purchase the fee — from the issuer, or from you immediately after you exercise your option or ROFR — and lease it back on a 99-year unsubordinated ground lease. The proceeds go to the trust as principal at the same closing. Rent is typically 25–30% of net cash flow, priced in the mid-6s, fixed, with 2% annual escalations and no fair-market-value resets ever.
We are a principal buying with our own capital. No syndicate to assemble, no third-party committee, and we fund at the modification closing rather than after it.
If your issuer holds fee with no reacquisition path in the documents, there may be no route to the dirt at all — check who holds fee and what the option says before anything else. If the loan is cheap fixed-rate agency debt with defeasance, paying it down with 6% land money destroys value and the defeasance blocks it anyway. And if the gap between what the land is worth and what the covenant demands is very large, the land narrows it rather than closing it — we will tell you that in the first conversation rather than the fourth.
The ground lease and regulatory agreement with the issuer (so we can see who holds fee and what the option says), the payoff letter or the servicer's covenant notice, and a trailing twelve. That is enough to price the fee and size the rent. Most of these are a one-week exercise, not a one-quarter exercise, and the covenant dates in these documents do not move.
Usually yes, but read the documents first. Most 2024-25 traveling HFC deals contain a right of first refusal or purchase option letting the fee return to the borrower if the issuer declines to keep it. Some do not, and in those the fee may be genuinely out of reach. Who holds fee and what the option says is the first question, before pricing anything.
Your lender is already a leasehold mortgagee under the existing HFC lease, which is the hard part. We are replacing who owns the fee, not creating a structure the loan has never seen. The lender also receives principal at closing and a full mortgagee protection package. That is a materially easier conversation than a foreclosure.
The obligation is satisfied with cash rather than waived. In several of the situations we have priced, the land proceeds exceed what the covenant demands, which turns a demand letter into a modification that arrives with its cure already funded.
That is between you and the lender, but a guaranty on a prepayment obligation that has been paid is not a live exposure. Getting the release papered is part of the modification, and it is a reason to move before the servicer's timeline runs rather than after.
Two to three weeks is achievable when the documents move, because we are a principal funding from our own balance sheet and there is no syndicate or outside investment committee in the path.
Send the ground lease, the covenant notice and a trailing twelve. You will get an indicative land value, the implied rent and coverage, and an honest read on whether it closes the gap or only narrows it.
Email us the property