Section 232 Loan Types

FHA offers several different types of loans under HUD Section 232 including new construction, purchase/refinance, substantial rehabilitation, refinance, supplemental loans, operating loan loss and fire safety equipment loans. The purpose of these loans is to finance long-term care and senior housing communities (skilled nursing, assisted living, intermediate care facilities and board and care homes).  The most frequently accessed loan types and terms are highlighted below.

 232 - New Construction

Description
A Project qualifies as new Construction when all projects and construction elements are installed as part of the construction contact and no work been done prior to the issuance of the HUD firm commitment
Leverage Guidelines
Lesser of:
  • 90% of Total Estimated Replacement Cost
  • 80% of SNF and Existing ALF value, 75% of new ALF value
  • 1.4x DSCR
Terms and Amortization
The maximum loan term is 40 years or 75% of the remaining economic life of the property, whichever is less
Resource
Non-resource
Other
Davis Bacon prevailing wages

 232 - Substantial Rehabilitation

Description
A Project qualifies as a substantial rehabilitation when the hard costs of repairs, replacements, and improvements exceeds 15% of the project’s values after completion of all repairs, replacements, and improvements or when two or more building components are being substantially replaced
Leverage Guidelines
Lesser of:
  • 90% of Total Estimated Replacement Cost
  • 80% of SNF and Existing ALF value, 75% of new ALF value, 75% for new ALF
  • 1.4x DSCR
  • Lesser of (a) 100% of existing debt or (b) 90% of as-is value, plus development and construction costs
Terms and Amortization
The maximum loan term is 40 years or 75% of the remaining economic life of the property, whichever is less
Resource
Non-resource
Other
Davis Bacon prevailing wages

 232/223(f) - Acquisition/Refinance

Description
This section allows for FHA-insured mortgages to be used to acquire aspects or to refinance non-HUD loans on the asset
Leverage Guidelines
Lesser of:
  • 80%
  • 1.4x DSCR
  • 100% of Net HUD Eligible Costs after Replacement for reserve on deposit and collateral reserves or escrow
Terms and Amortization
The maximum loan term is 35 years or 75% of the remaining economic life of the property, whichever is less
Resource
Non-resource

 232/241(a) - Supplemental Loan

Description
Supplemental Loans under section 241 (a) are permitted for existing FHA-insured loans to complete an addition, repairs, replacements, energy conservation measures and/or improvements
Leverage Guidelines
Lesser of:
  • 90% of Total Estimated Replacement Cost
  • 90% of the difference between the as proposed and as-is values
  • 1.4x DSCR after reducing the DSR on the 1st lien from EBITDAR
  • 90% of as-proposed market value less 100% of outstanding indebtedness
Terms and Amortization
The loan term is limited to the term of the existing insured mortgage, unless otherwise approved by HUD
Resource
Non-Resource
Other
Davis Bacon prevailing wages NOT required if following a 223(f)

 232/223(a)(7) - HUD Refinance

Description
Streamlined refinance of an existing FHA-insured loan
Leverage Guidelines
Lesser of:
  • 100% of original principle amount of the existing mortgage
  • 100% of Net HUD Eligible Costs after Replacement for reserve on deposit
Terms and Amortization
In general, the term of the new refinanced loan will not exceed the remaining term of the existing loan. However, ORCF may approve a term extension if ORCF determines that the longer term will insure to the benefit of the FHA Fund
Resource
Non-resource
​To download a pdf of the Section 232 loan types, please click here.

Section II, Chapter 2 of HUD’s Healthcare Mortgage Insurance Program Handbook (4232.1) offers an in depth description of the Section 232 Loan types and eligibility requirements.

 HUD Webinars

​To access HUD webinars on the Section 232 program, please click on the links below.


2019 - Section 232:  Program Overview and Asset Management Document Updates

This webinar offers an overview about programs offered through ORCF and detailed information related to changes in the required HUD-published documents for use by borrowers and operators in performing asset management functions in their facilities.


2020 - Section 232 Program Overview and ORCF's Response to COVID-19

This webinar provides a brief overview of the ORCF and discusses various issues brought on by the pandemic including discussion of relief options, financial treatment of loans and grants and changes in ORCF policy to adapt to the crisis.

To gain a high level understanding of the Section 232 loan process and HUD processing timeline, please click here.
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