FHA HUD 232/223(F)
Section 232 insures mortgage loans to facilitate the construction and substantial rehabilitation of nursing homes, intermediate care facilities, board and care homes, and assisted-living facilities. Section 232/223(f) allows for the purchase or refinancing with or without repairs of existing projects not requiring substantial rehabilitation.
Section 232 insures lenders against the loss on mortgage defaults. Section 232 insures mortgages that cover the construction and rehabilitation of nursing homes and assisted living facilities for people who need long-term care or medical attention. The program allows for long-term, fixed rate financing (up to 40 years) for new and rehabilitated properties and (up to 35 years) for existing properties without rehabilitation that can be financed with Government National Mortgage Association (GNMA) Mortgage Backed Securities.
Type of Assistance
FHA mortgage insurance for HUD-approved lenders
Insured mortgages may be used to: 1) finance the construction and rehabilitation of nursing homes, intermediate care facilities, board and care homes, and assisted living facilities; 2) enable borrowers to buy or refinance (with or without repairs) projects that do not need substantial rehabilitation; 3) install fire safety equipment.
Facilities must accommodate 20 or more residents who require skilled nursing care and related medical services, or those who while not in need of nursing home care, are in need of minimum but continuous care provided by licensed or trained personnel. Assisted living facilities, nursing homes, intermediate care facilities, and board and care homes may be combined in the same facility covered by an insured mortgage or may be in separate facilities. Insured mortgages may include the cost of major movable equipment, daycare facilities, and the installation of fire safety equipment. Assisted living facilities, nursing homes, intermediate care homes, and board and care homes must be licensed or regulated by the appropriate state agency, municipality, or other political subdivision where located.
The maximum amount of the loan for new construction and substantial rehabilitation is equal to 90 percent (95 percent for nonprofit sponsors) of the estimated value of physical improvements and major movable equipment. For existing projects, the maximum is 85 percent (90 percent for nonprofit sponsors) of the estimated value of the physical improvements and major movable equipment.
Eligible mortgagors include investors, builders, developers, public entities (nursing homes) and private nonprofit corporation and associations. For nursing homes only, applicants may be public agencies that are licensed or regulated by a State to care for convalescents and people who need nursing or intermediate care. A potential applicant must submit a Certificate of Need from the State agency designated by the Public Health Service Act. (If no State agency exists, an alternative study is required.) No Certificate of Need is required for board and care homes or assisted living facilities; instead, the applicant needs a statement from the appropriate State agency. The applicant must also provide documents that demonstrate the appropriateness of the property and the qualifications of the lender.
Residents requiring skill nursing, custodial care, and assistance with activities of daily living are eligible to live in facilities insured under this program.
HUD developed its LEAN process in 2008 for Section 232 applications – it only applies to Section 232 applications. Previously, loans were processed under Multifamily Accelerated Processing (MAP) or Traditional Application Processing (TAP) by the local HUD Field Office. It should be noted that non-Section 232 projects will continue to be processed under MAP or TAP.
Whichever process is used (as mentioned above), applications for mortgage insurance are assembled and underwritten by FHA-Approved Lenders before submittal to HUD for processing of the Firm Commitment (there is also a Pre-application process for projects with new units whereby HUD comments on the market).
HUD’s new LEAN process employs standardized work product and processes to obtain a consistent, timely result. The following are some of the changes implemented with the LEAN process:
- We have developed standardized checklists, statements of work for third party work, certifications, and templates for the lenders to use in their assembly of the application package. Moreover, we have developed standardized punch lists for HUD staff to use in their underwriting of submitted applications.
- HUD begins its legal review immediately when the Firm Application is submitted – to cut down the time between Firm Commitment issuance and closing.
- We have removed portions of the application process/requirements for submittal that were duplicative or not necessary (e.g. no need to submit closing related documents that are submitted with the Firm Application twice, removal of forms that are not needed, development of consolidated certifications, etc).
- We have revised the third party appraisal requirements so that the appraisal is a market appraisal – no requirement to use HUD forms and no proprietary earnings carve out.
Phase in of LEAN Processing of Section 232’s:
- Effective September 1, 2008, all Section 232/223(f)’s (refinance or purchase of projects that are 3+ years old that are not in need of substantial rehabilitation) are required to be processed using the new LEAN process.
- Effective March 1, 2009, all other Section 232 loans (including new construction, substantial rehabilitation, supplemental loans, operating loss loans, and Section 223(a)(7) loans) will be processed with our new LEAN process. The lender has the option of submitting these types of Section 232’s via LEAN or MAP/TAP until then.
- Any loan application that was submitted MAP/TAP to the Field Office prior to the above dates may continue to be processed under MAP/TAP all the way to Final Closing.
This program is authorized by Section 232 of the National Housing Act (12 U.S.C. 1715w). Refer to the MAP web-site for guidelines and instructions, lender approval requirements, and MAP Coordinators. The program is administered by the Office of Multifamily Housing Development.