FHA Section 232 Mortgage Insurance Program

---

Fixed rate construction and permanent financing for the construction or substantial rehabilitation of assisted living, nursing home, intermediate care and board and care facilities. Available for properties throughout the United States.

ELIGIBLE PROPERTIES

Licensed skilled nursing and rehabilitation, assisted living, memory care, intermediate care, and board and care facilities with limited independent living units.

ELIGIBLE BORROWERS

Single-asset, special purpose entities, either for-profit or non-profit.

LOCATION

Nationwide

LOAN AMOUNT

No minimum/no maximum (subject to General Loan Parameters).

GENERAL LOAN PARAMETERS

Maximum loan amount:

• For new construction projects, the lesser of (a) 90% of total replacement cost, (b) 80% of stabilized value for skilled nursing facilities, 75% of stabilized value for assisted living and memory care facilities, or (c) an amount that results in a DSCR of 1.45x based on the underwritten NOI.
• For substantial rehabilitation projects, there will be an additional limitation: 100% of rehabilitation costs plus the lesser of (a) 90% of the as-is value of the property or (b) 100% of existing indebtedness (if owned) or 85% of eligible acquisition costs (for acquisitions).

Please note, the maximum LTV may be increased by 5% for non-profit borrowing entities.

INTEREST RATE

Fixed-rate, subject to market conditions at time of rate lock.

TERM & AMORTIZATION

Interest-only during construction period followed by 40 years, fully amortizing.

LIABILITY

Non-recourse.

MORTGAGE INSURANCE PREMIUM

0.77% at closing,
0.77% annually thereafter.

ASSUMABILITY

Fully assumable, subject to HUD approval.

PREPAYMENT

Typically loans are prohibited from prepayment for the 1st year, then have a 9% penalty declining 1% each year thereafter until 0%.  Alternative lockout and prepayment structures are available.

PROFESSIONAL LIABILITY INSURANCE

HUD requires a minimum coverage of $1 million per occurrence and $3 million in aggregate.  Waivers may be granted in cases where premiums are high and claims history is clean.

DAVIS-BACON WAGES

Payment of prevailing wages is required by HUD for all contractors and subcontractors.  

OTHER

• Unlicensed independent living units are allowed, but cannot exceed 25% of the project's total units. 
• Escrows required for repairs, mortgage insurance premium, taxes, insurance, and replacement reserves.
• Required third party reports include Market Study, Appraisal, Plans and Specs Review, and ESA
• Secondary financing is allowed, subject to HUD approval.

Pricing: 

Contact your First American representative for a price quote.