Bankruptcy-Remote Entities and the HUD 223(a)(7) Loan Program
A bankruptcy-remote entity is an entity within a larger company or corporation whose bankruptcy would have little impact on the rest of the corporation. In the case of real estate investments, a bankruptcy-remote entity is often also a special-purpose entity (SPE). This means that it only has one, specific purpose (typically to own a piece of multifamily or commercial real estate.) SPEs are also often referred to as single-asset entities (SAEs). In most cases, properties purchased or refinanced with HUD multifamily loans (including the HUD 223(a)(7) refinance) need to be owned by a bankruptcy-remote entity such as an SPE/SAE.