HEALTHCARE PROPERTIES

HUD Interest Rate Reduction Loan Modification Program

Our HUD interest rate reduction loan program provides loan modifications for healthcare properties with existing FHA-insured debt.

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Eligible Properties

Any property with existing HUD-insured loan.

Term

Unchanged from existing mortgage, no term extension available.

Interest Rate

Locked before closing and fixed for the duration of the term. (Subject to market conditions.)

Prepayment

Customizable, typically a step-down period, other variations possible, based on market conditions and borrower preferences.

Loan Conditions

1.05x DSC Ratio
The annual Mortgage Insurance Premium (MIP) is unchanged from existing mortgage.

Third-Party Reports

Property Capital Needs Assessment (PCNA) may be required.

Timing

Approximately 30 – 45 days for engagement, submission, FHA/HUD review, and closing.

MULTIFAMILY

Interest Rate Reduction Loan Modification Program

Our HUD interest rate reduction program provides loan modifications for multifamily properties with existing FHA-insured debt.

Download PDF Version

Eligible Properties

Any property with existing HUD-insured loan.

Term

Unchanged from existing mortgage, no term extension available.

Interest Rate

Locked before closing and fixed for the duration of the term. (Subject to market conditions.)

Prepayment

Customizable, typically a step-down period, other variations possible, based on market conditions and borrower preferences.

Loan Conditions

1.05x DSC Ratio
The annual Mortgage Insurance Premium (MIP) is unchanged from existing mortgage.

Third-Party Reports

Property Capital Needs Assessment (PCNA) may be required.

Timing

Approximately 30 – 45 days for engagement, submission, FHA/HUD review, and closing.

HOSPITALS | FHA/HUD Section 242/223(f)

Acquisition and Refinancing of Hospital Properties

Our HUD Section 242/223(f) program provides for the acquisition or refinance of hospital properties.

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Eligible Properties

The facility must be a licensed hospital.

Eligible Borrowers

For-profit or not-for-profit.

Term

Up to 25 years, self-amortizing.

Interest Rate

Locked before closing and fixed for the duration of the term. (Subject to market conditions)

Security

First mortgage on subject property and all improvements.

Loan Parameters

Over the past three years:

Aggregate debt service coverage ratio greater than 1.40%.
Aggregate positive operating margin.

HUD Fees and Expenses

FHA application (examination) fee: 0.3% of mortgage amount.
FHA inspection fee (varies by deal).
Mortgage Insurance Premium of 0.65% of the outstanding loan amount.

Third-Party Reports

Phase I Environmental Assessment and may include study of market need and financial feasibility prepared by a CPA firm (HUD will determine the need for such a study on a case-by-case basis).

Timing

Approximately 8 – 10 months for engagement, submission, FHA/HUD review, and closing.

Funding

Ginnie Mae guaranteed mortgage-backed securities.

Eligibility Requirements

The hospital must have an aggregate operating margin of greater than or equal to 1:1 and an average debt service coverage ratio of at least 1.40 for the past three years, and meet three of the following seven criteria:

Total operating expenses will be decreased as a result of refinancing by at least 0.25%.
New interest rate will be at least 50 bps less than the current rate.
Current interest rate has increased at least 1 % since January 1, 2008 or will very likely increase by that amount within a year of filing an application.
Total annual debt service in the most recent audited financials is at least 3.4% of total operating revenues.
Credit enhancement on current financing has been or will imminently be withdrawn or expired, or the provider has been or will be downgraded.
Existing financing has overly restrictive or onerous bond covenants.
Other circumstances exist that demonstrate that the hospital’s financial health depends upon refinancing its existing capital debt.

Other Program Parameters

Escrows for property taxes, insurance, MIP, working capital, and replacement reserves are required.
If the State has a Certificate of Need (CON) process, a CON must be issued or pending.
Mortgage cannot be insured if a major construction project is currently underway. Construction must be complete for at least two years prior to applying for an FHA refinance loan. Starting with commencement of amortization, FHA requires insured hospitals to make contributions to a Mortgage Reserve Fund (MRF). The MRF must be funded through annual contributions so that it achieves a funding level equal to one year of debt service by five years after commencement of amortization and two years of debt service after ten years of amortization. The MRF may be used, at FHA’s discretion, to assist the hospital with mortgage payments if the need arises.

HOSPITALS | FHA/HUD Section 242/223(a)(7)

Refinancing of Healthcare Properties with Existing FHA-Insured Debt

Our HUD Section 242/223(a)(7) program provides for the streamlined refinance of an existing FHA-insured project.

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Term

Up to 12 years beyond the remaining term of the existing mortgage, but not to exceed the original term. A term extension request must be supported by a determination of the remaining economic life of the property.

Loan Parameters

Loan principal can be increased to original FHA-insured loan amount.

HUD Fees and Expenses

FHA application (examination) fee: 0.3% of mortgage amount.
Mortgage Insurance Premium of 0.55% of the outstanding loan amount.

Funding

Ginnie Mae guaranteed mortgage-backed securities.

Other Program Parameters

The Mortgage Reserve Fund (MRF) established for the hospital’s original 242 insured loan must be continued. However, the MRF Schedule can be renegotiated to make it consistent with the interest rate and term of the refinanced loan.

HOSPITALS | FHA/HUD Section 242

Affordable Financing for New Construction or Substantial Rehabilitation of Hospitals

Our HUD Section 242 program provides long-term, low fixed-rate, financing for the construction and permanent financing of acute care and critical access hospitals.

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Eligible Properties

The facility must be a licensed hospital.

Eligible Borrowers

For-profit or not-for-profit.

Term

Up to 25 years, self-amortizing. Construction period is interest only.

Interest Rate

Locked before closing and fixed for the duration of the term. (Subject to market conditions.)

Security

First mortgage on subject property and all improvements and equipment financed.

Loan Parameters

Over the past three years:

Aggregate debt service coverage ratio greater than 1.25%.
Aggregate positive operating margin.
Construction must be approved before start of construction.

HUD Fees and Expenses

FHA Application Fee of 0.30% of loan amount.
FHA Inspection Fee of 0.50% of loan amount.
Annual Mortgage Insurance Premium of 0.70% of the outstanding loan amount.

Third-Party Reports

Market Study, Appraisal, Phase I Environmental, and Architectural & Cost Review.

Timing

Approximately 8 – 10 months for engagement, submission, FHA/HUD review, and closing.

Funding

Ginnie Mae guaranteed mortgage-backed securities.

Other Program Parameters

Escrows for property taxes, insurance, MIP, working capital, and replacement reserves are required.
If the State has a Certificate of Need (CON) process, a CON must be issued or pending.
Local prevailing wages, as per Department of Labor, paid under Davis-Bacon Act.

HEALTHCARE PROPERTIES | FHA/HUD Section 232/223(f)

Acquisition and Refinancing of Healthcare Properties

Our FHA/HUD Section 232/223(f) program provides long-term permanent financing for the acquisition or refinance of healthcare properties.

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Eligible Properties

Licensed assisted living, skilled nursing homes, intermediate care, and board and care facilities.

Facility must be licensed by the state.
Facility must provide three meals per day.
Facility must provide continuous protective oversight.
Non-resident day care must not exceed 20% of gross area and 20% of gross income.
May include up to 25% non-licensed independent living units.

Eligible Borrowers

Experienced for-profit or not-for-profit owners. Single asset, special purpose entity.

Term

Up to 35 years, or 75% of the remaining economic life, but no less than 10 years.

Interest Rate

Locked before closing and fixed for the duration of the term. (Subject to market conditions.)

Guarantees

Non-recourse for the duration of the term.

Prepayment

Customizable, typically a 10-year step down, based on market conditions and borrower preferences.

Assumable

Subject to FHA/HUD and lender approval.

Loan Parameters

Property Type	Max Loan-to-Cost Ratio	Max LTV Ratio	Min DSC Ratio	Mortgage Insurance Premium (LIHTC)
For-Profit	100%	80%*	1.45	.065% (0.45%)
Not-for-Profit	100%	85%*	1.45	.065% (0.45%)

(*For acquisition financing, LTV increase by 5%.)

HUD Fees and Expenses

FHA Application Fee of 0.30% of loan amount.
FHA Inspection Fee of the greater of $30 per /bed or 1% of repairs.

Commercial Space

Limited to 20% of net rentable area and 20% of effective gross income.

Third-Party Reports

Appraisal, Environmental, Property Capital Needs Assessment (PCNA).

Repairs/Improvements

Funds for repairs, deferred maintenance, and capital improvements for generally up to 15% of value can be included in the loan amount, subject to the maximum loan limitations.

Timing

Approximately 6-9 months for engagement, submission, FHA/HUD review, and closing. Process may vary due to Office of Residential Care Facilities volume.

Funding

Ginnie Mae guaranteed mortgage-backed securities.

Other Program Parameters

Escrows for property taxes, insurance, MIP and replacement reserves are required.
Cash-Out is not permitted.
Facilities financed under this program must be at least 3 years old.
Existing debt to be refinanced must be at least two years old unless it was used for an eligible purpose as defined by FHA (refinancing of prior eligible indebtedness, arms-length acquisition, property improvements, operating losses, etc.).
A master lease may be required when an owner finances 3 or more properties or $15 million or greater in combined loan amounts with the FHA healthcare programs within an 18-month period.

HEALTHCARE PROPERTIES | FHA/HUD Section 232/223(a)(7)

Refinancing of Healthcare Properties with Existing FHA-Insured Debt

Our FHA/HUD Section 232/223(a)(7) mortgage program provides for the streamlined refinance of an existing FHA-insured project.

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Eligible Properties

All properties that currently have FHA-insured debt.

Term

Up to 12 years extension of the original FHA-insured loan maturity, not to exceed the maximum term for the original loan program.

Interest Rate

Locked before closing and fixed for the duration of the term. (Subject to market conditions.)

Guarantees

Non-recourse for the duration of the term.

Prepayment

Customizable, typically a 10-year step down, based on market conditions and borrower preferences.

Assumable

Subject to FHA/HUD and lender approval.

Loan Parameters

Maximum loan amount will be the lesser of the original principal balance when first insured or parameters below.

Property Type	Max Loan to Refinance Cost Ratio	Min Debt Service Coverage Ratio
Assisted Living	100%	1.11
Skilled Nursing	100%	1.11

Fees and Expenses

FHA Application Fee of 0.15% of loan amount.
Mortgage Insurance Premium of 0.5% due to HUD at closing and 0.55% annually thereafter.

Third-Party Reports

Property Capital Needs Assessment (PCNA) required.

Timing

Approximately 3 - 4 months for engagement, submission, FHA/HUD review, and closing.

Funding

Ginnie Mae guaranteed mortgage-backed securities.

Other Program Parameters

Cash out is not permitted.

HEALTHCARE PROPERTIES | FHA/HUD Section 232

New Construction or Substantial Rehabilitation Loan

Our HUD Section 232 mortgage program provides long-term, low fixed-rate, non-recourse, assumable financing for the construction and permanent financing of healthcare properties.

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Eligible Properties

Licensed assisted living, skilled nursing homes, intermediate care, and board and care facilities.

Facility must be licensed by the state.
Facility must provide three meals per day.
Facility must provide continuous protective oversight.
Non-resident day care must not exceed 20% of gross area and 20% of gross income.
May include up to 25% non-licensed independent living units.

Eligible Borrowers

Experienced, single asset, for-profit or not-for-profit owners.

Term

Up to 40 years, fully amortizing (plus interest only period during construction).

Interest Rate

Locked before closing and fixed for the duration of the construction period and full 40-year term. (Subject to market conditions.)

Guarantees

Non-recourse for the construction period and duration of the term.

Prepayment

Customizable, typically a 10-year step down, based on market conditions and borrower preferences.

Assumable

Subject to FHA/HUD and lender approval.

Loan Parameters

Property Type	Max Loan-to-Cost Ratio	Max LTV Ratio (not-for-profit)	Min DSC Ratio	Mortgage Insurance Premium (LIHTC)
Assisted Living	90%	75% (80%)	1.45	.077% (0.45%)
Skilled Nursing	90%	80% (85%)	1.45	.077% (0.45%)

HUD Fees and Expenses

FHA Application Fee of 0.30% of loan amount.
FHA Inspection Fee of 0.50% of loan amount (new construction) and 0.50% of costs associated with construction (substantial rehabilitation).

Commercial Space

Limited to 10% of net rentable space and 15% of gross income.

Third-Party Reports

Market Study, Appraisal, Phase I Environmental, and Architectural & Cost Review.

Construction Wages

Local prevailing wages, as per Department of Labor, paid under Davis-Bacon Act.

Timing

Approximately 8 – 10 months for engagement, submission, FHA/HUD review, and closing.

Funding

Ginnie Mae guaranteed mortgage-backed securities.

Other Program Parameters

Escrows for property taxes, insurance, MIP, working capital, and replacement reserves are required.

HEALTHCARE PROPERTIES | FHA/HUD Section 232/241(a)

Repairs, Additions, and Improvements to Healthcare Properties with Existing FHA-Insured Debts

Our FHA/HUD Section 232/241(a) program provides for the financing of repairs, additions, and improvements to facilities with an existing FHA-insured first mortgage.

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Eligible Properties

Licensed assisted living, skilled nursing homes, intermediate care, and board and care facilities.

Term

40 years or 75% of the remaining economic life, not to exceed the remaining term of the first mortgage without HUD approval.

Interest Rate

Locked before closing and fixed for the duration of the term. (Subject to market conditions.)

Guarantees

Non-recourse for the duration of the term.

Prepayment

Customizable, typically a step-down period, other variations possible, based on market conditions and borrower preferences.

Assumable

Subject to FHA/HUD and lender approval.

Loan Parameters

Loans insured under 241(a) assume program characteristics of the underlying the mortgage insurance program.

Maximum Loan

The lesser of:

The amount of debt that can be serviced by 90% net operating income to the property after completion of the new improvements, less the current annual debt service requirements on all outstanding indebtedness relating to the property;
The lesser of 90% of (a) value, or (b) costs attributed to the repairs, additions or improvements;
The amount of debt which when added to existing outstanding indebtedness relating to the property, does not exceed 90% Loan to Value of the combined first mortgage and 241(a) addition.

HUD Fees and Expenses

The annual Mortgage Insurance Premium (MIP) ranges from 0.25% to 0.95% of the outstanding loan amount depending on loan and property parameters.
FHA Application Fee of 0.30% of loan amount.
FHA Inspection Fee of 0.50% of loan amount.

Third-Party Reports

Market Study, Appraisal, Phase I Environmental, and Architectural & Cost Review.

Timing

Approximately 6-9 months for engagement, submission, FHA/HUD review, and closing.

Funding

Ginnie Mae guaranteed mortgage-backed securities.

Other Program Parameters

Escrows for property taxes, insurance, MIP, working capital, and replacement reserves are required.
Davis-Bacon prevailing wage requirements do apply to construction/repair costs if the first mortgage loan was financed under FHA’s construction loan program (Section 232). If the existing loan was financed under FHA’s acquisition/refinancing program (Section 232/223(f)) then Davis-Bacon prevailing wages do not apply.

MULTIFAMILY | FHA/HUD Section 241(a)

Repairs, Additions, and Improvements to Multifamily Properties with Existing FHA-Insured Debts

Our HUD Section 241(a) program provides for the financing of repairs, additions, and improvements to properties with an existing FHA insured first mortgage.

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Eligible Properties

Market rate, affordable, or subsidized multifamily properties.

Term

40 years or 75% of the remaining economic life, not to exceed the remaining term of the first mortgage without HUD approval.

Interest Rate

Locked before closing and fixed for the duration of the term. (Subject to market conditions.)

Guarantees

Non-recourse for the duration of the term.

Prepayment

Customizable, typically a step-down period, other variations possible, based on market conditions and borrower preferences.

Assumable

Subject to FHA/HUD and lender approval.

Loan Parameters

Loans insured under 241(a) assume program characteristics of the underlying the mortgage insurance program.

Maximum Loan

The lesser of:

The amount of debt that can be serviced by 90% net operating income to the property after completion of the new improvements, less the current annual debt service requirements on all outstanding indebtedness relating to the property;
The lesser of 90% of (a) value, or (b) costs attributed to the repairs, additions or improvements;
The amount of debt which when added to existing outstanding indebtedness relating to the property, does not exceed 90% Loan to Value of the combined first mortgage and 241(a) addition.

HUD Fees and Expenses

The annual Mortgage Insurance Premium (MIP) ranges from 0.25% to 0.95% of the outstanding loan amount depending on loan and property parameters.
FHA Application Fee of 0.30% of loan amount.
FHA Inspection Fee of 0.50% of loan amount.

Third-Party Reports

Market Study, Appraisal, Phase I Environmental, and Architectural & Cost Review.

Timing

Approximately 6-9 months for engagement, submission, FHA/HUD review, and closing.

Funding

Ginnie Mae guaranteed mortgage-backed securities.

Other Program Parameters

Escrows for property taxes, insurance, MIP, working capital, and replacement reserves are required.
Davis-Bacon prevailing wage requirements do apply to construction/repair costs if the first mortgage loan was financed under FHA’s construction loan program (Section 221(d)(4)). If the existing loan was financed under FHA’s acquisition/refinancing program (Section 223(f)) then Davis-Bacon prevailing wages do
not apply.