Houston Multifamily Loan Hits Special Servicing as Texas HB 21 Ends Key Tax Breaks

Legacy Wealth Holdings' Waterford Grove Apartments loan faces default as Texas HB 21 axes "traveling" HFC tax exemptions, forcing a $62.5M CMBS loan into special servicing.

By: AXL Media

Published: Mar 24, 2026, 11:49 AM EDT

Source: Bisnow

The Catalyst: Texas House Bill 21

For years, Texas developers utilized HFCs and Public Facility Corporations (PFCs) to secure 100% property tax exemptions in exchange for designating a portion of units as affordable housing.

The "Traveling" HFC Loophole: Legacy Wealth Holdings had originally secured its Houston tax break through an HFC based in Edcouch, a small city near the Mexico border.

The Crackdown: HB 21 effectively outlawed these "traveling" arrangements, requiring apartment owners to partner exclusively with local organizations within the same jurisdiction as the property.

Consequences: By losing the exemption on Feb. 15, the property’s operating expenses skyrocketed, triggering clauses in the loan agreement that Legacy was reportedly unable or unwilling to meet.

Loan Distress and Valuation Gaps