FHA Insurance
Programs
Section 232 Pursuant to Section 223(f)
Refinance/Acquisition - Skilled Care, Assisted Living, Board & Care
Facilities
Purpose: FHA’s Section 232 pursuant to Section 223(f) program
provides mortgage insurance for the refinance or purchase of existing
nursing homes, intermediate care facilities, board and care homes and
assisted living facilities (collectively, “Residential Care
Facilities”). Facilities currently financed with FHA insured mortgages
are eligible for streamlined refinancing through the FHA Section
223(a)(7) program.
Independent living units can comprise up to 25% of the total number of
beds or units in a facility and operating deficit escrows and debt
service reserves will be required.
Eligible Borrowers: Profit motivated, non-profit and public
owners are eligible.
Maximum Term: 35 years (fully amortizing) or 75% of the estimated
remaining economic life whichever is less, with a minimum term of 10
years.
Maximum Loan:
Refinancing:
The lesser of:
(1) 85% of FHA's value (90% for non-profits)
(2) Amount of debt serviced by 85% of NOI attributable to the real
estate (90% for non-profits)
(3) 100% of HUD approved transaction costs (no equity take-out)
(4) 100% of mortgagable costs less grants, public loans, and tax credits
Acquisition:
The lesser of:
(1) 85% of FHA's value (90% for non-profits)
(2) Amount of debt serviced by 85% of NOI attributable to the real
estate (90% for non-profits)
(3) 85% of HUD approved acquisition costs (90% for non-profits)
(4) 100% of mortgagable costs less grants, public loans, and tax credits
NOI & Value Calculation: In determining underwritten NOI,
management fees are not included; however, a proprietary income amount,
typically equal to 10% to 25% (depending on the services and level of
care provided) is deducted to arrive at an underwritten NOI for debt
service
coverage and loan to value sizing tests.
Personal Liability: None. Non-Recourse.
Prepayment: Typically either: (i) closed for 10 years then open
to prepayment at par, or (ii) closed for five years then open to
prepayment at 105 in year six, declining 1% per year.
FHA Application Fees: 0.3% of the loan amount.
Mortgage Insurance Premium: FHA resets on a yearly basis the
annual MIP which historically has been 50 basis points per year. Once
set, the MIP does not vary for the life of the loan. The first year MIP
for refinances is set at 1%.
Secondary Financing: Permitted in form of surplus cash note, up
to 7.5% of the project’s value.
Repairs/Replacements: 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 85% loan to value limitations.
Funding: Qualifies for Ginnie Mae guaranteed mortgage-backed
securities or direct placement or may be used to credit enhance
tax-exempt bonds.
Interest Rate: Subject to market conditions.
Territory: Nationwide
The program has the following additional parameters:
The FHA Section 232 pursuant to 223(f) mortgage insurance program is the
most attractive credit enhancement program available for taxable and
tax-exempt acquisition financing or refinance of existing nursing homes,
intermediate care facilities, assisted living facilities, and board and
care (personal care) facilities.
An initial deposit to a replacement reserve will be required at closing.
The deposit can be capitalized in the mortgage loan.
Under MAP, an application can be processed in 60 days or less from
submission of a complete package.
No cost certification (as is applicable to the new construction and
substantial rehabilitation programs) is required.
Davis Bacon prevailing wage requirements do not apply.
Eligible Properties:
Residential Care Facilities (nursing homes, intermediate care
facilities, board and care, and assisted living facilities) must be at
least three years old and must provide the necessary space for a central
kitchen (whether utilized or not) and group dining. If day care is
provided, the day care program must be self supporting. A Residential
Care Facility must be licensed and/or regulated by the state (or another
political subdivision).
Assisted living facilities and board and care or personal care
facilities also must provide separate dwelling units and have supportive
services available to assist residents in carrying out the activities of
daily living, including common rooms and the facilities necessary for
the provision of the above-noted supportive services. Individual
assisted living units may contain a kitchenette or full kitchen, and a
full bath.
In its pre-qualifying review, American Trust Corporation will estimate
both the loan amount and the fees and costs associated with the
transaction. Actual loan amounts and actual fees and expenses may vary
from the pre-qualifying estimates. A pre-qualifying estimate is not a
commitment to make a loan.
Application Fee: $2,500 non-refundable inspection/loan processing
fee payable to American Trust Corporation with the loan application,
will be credited to origination fee at closing
Origination Fee: 1%
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