The U.S. Department of Housing and Urban Development (HUD) and the Federal Housing Administration’s (FHA) Section 232 LEAN program for senior care facilities debuted in 2008. The program was designed to meet the capital needs of senior housing and long-term-care facilities and continues to serve as an important source of debt capital to the senior housing industry. We will be taking a closer look at the program in honor of its 10th anniversary.
If you are considering financing a healthcare project, here are 10 things you should know:
FHA loans are non-recourse and fully assumable with a low, fixed interest rate.
The FHA Section 232/223(f) refinance program allows you to acquire or refinance healthcare properties, including licensed nursing homes, assisted living, intermediate care, and board and care facilities.
HUD continues to increase its production year-over-year and the Section 232 program continues to serve as an important source of debt capital to the seniors housing industry.
For the fiscal year ending Sept. 30, 2017 the program closed $3.4 billion of loan volume, an increase of 20% as compared to 2016. The FHA Section 232/223(f) refinance program was the largest contributor to the volume as it processed 273 of the loans with a total loan amount of $2.8 billion.
The 232 mortgage insurance program is one of the most attractive credit enhancement programs, available for new construction and rehabilitation of residential care facilities, providing permanent financing at a low interest rate.
Some of your operational debts, such as furniture, furnishings and equipment (FFE) and working capital related to lease-up and/or stabilization of the project can be included in the 232/223(f) refinance program. In the past, these operational debts could not be included in your financing.
When using a short-term bridge loan, HUD will refinance loans that include an equity cash out.
There is no longer an automatic two-year seasoning requirement, but rather tiered leverage depending on the use of the existing debt.
The 241(a) program is intended to keep a property competitive, extend its economic life, and provide replacement of obsolescent equipment.