Archives: HUD Programs

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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Healthcare Facilities

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

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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Healthcare Facilities

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.
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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Healthcare Facilities

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

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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Healthcare Facilities

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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Multifamily Housing

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) is 0.25% of loan amount.
  • 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.

MULTIFAMILY | FHA/HUD Section 223(f)

Acquisition and Refinancing of Multifamily Properties

Our HUD Section 223(f) program provides for permanent financing for the purchase or refinance of market rate multifamily properties, affordable or rental assisted properties.

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Multifamily Housing

Eligible Properties

Multifamily properties including market rates, affordable or rental assisted properties.

Term

Up to 35 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

Maximum loan amount will be the lessor of parameters below. Large loans (currently > $130MM) carry more conservative UW numbers.
Market Rate 87% 87% 1.15
Eligible Affordable 90% 90% 1.15
Subsidized 90% 1.11 1.11

(*Max LTV for cash out refinance is 80%.)

HUD Fees and Expenses

  • The annual Mortgage Insurance Premium (MIP) is 0.25% of the outstanding loan amount for market rate transactions.
  • FHA Application Fee of 0.30% of loan amount.
  • FHA Inspection Fee is $30 per unit where the repairs/improvements are greater than $100,000 in total but $3,000 or less per unit or $30 per unit or 1% of the cost of repairs or $1,500, whichever is greater, where the repairs/improvements are more than $3,000 per unit or $1,500 where the repairs/improvements are less than $100,000.
  • Replacement Reserves determined by a 20-year capital needs analysis, minimum of $250 per unit per annum.

Commercial Space

Limited to 25% of net rentable space and 20% of gross income.

Third-Party Reports

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

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, and replacement reserves are required.
  • Total repairs are limited to approximately $45,000 per unit with valuation and DSC assuming completion of those repairs. Lender holds 110%-120% escrow and repairs must be completed in 12 months.
  • Age restricted properties may quality so long as head of household is 62 or older and occupancy is not restricted to any remaining occupants. Affordable properties may be eligible for 55+ restriction.

MULTIFAMILY | FHA/HUD Section 223(a)(7)

Refinancing of Multifamily Properties with Existing FHA-Insured Debt

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

Download PDF Version
Multifamily Housing

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.
Market Rate 100% 1.11 0.50% / 0.25%*
Affordable 100% 1.11 0.45% / 0.25%*
Subsidized 100% 1.05 0.25%

(*If project meets Green/Energy Efficient housing qualifications.)

HUD Fees and Expenses

FHA Application Fee of 0.15% of loan amount.

Third-Party Reports

Property Capital Needs Assessment (PCNA) may be required.

Timing

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

Funding

Ginnie Mae guaranteed mortgage-backed securities.

Other Program Parameters

  • Repairs limited to $1,500 per unit, exclusive of accessibility changes.
  • Cash out is not permitted.

MULTIFAMILY | FHA/HUD Section 221(d)(4)

New Construction or Substantial Rehabilitation Loan

Our HUD Section 221(d)(4) program provides long-term, low fixed-rate, non-recourse, assumable financing for the construction and permanent financing of new apartment projects or substantial rehabilitation of existing apartment projects.

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Multifamily Housing

Eligible Properties

Market rate, affordable, or subsidized multifamily properties.

Eligible Borrowers

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

Term

Maximum of 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

Market Rate 87% 1.15
Eligible Affordable 90% 1.11
Subsidized 90% 1.11
*Middle Income 90% 1.11

Large loans carry more conservative UW parameters.

*Eligible Middle Income projects must be regulated with minimum 50% of units at or below 120% median income.

HUD Fees and Expenses

  • The annual Mortgage Insurance Premium (MIP) is 0.25% of the outstanding loan amount for market rate transactions.
  • 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).
  • Replacement Reserves determined by a 20-year capital needs analysis, minimum of $250 per unit per annum.

Commercial Space

Limited to 25% of net rentable space and 15% of gross income. Alternative Section 220 program may be available for properties with more commercial 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 – 12 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, and replacement reserves are required.
  • Working Capital and Initial Operating Deficit escrows held by lender and if not used for intended purposes, generally released at final endorsements plug 12 months (assumes 6 months Break Even coverage).
  • Cost includes a builders fee and sport profit amount depends upon ownership structure.
  • Age-restricted properties may qualify so long as head of household 62+ and all others unrestricted children must be permitted. Alternative program available restricted all residents to 62+.
  • Value of land is included in eligible costs.