Summary:
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.
Purpose:
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
Eligible Activities:
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 Borrowers:
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.
Eligible
Customers:
Residents requiring skill nursing, custodial care, and assistance
with activities of daily living are eligible to live in facilities insured under
this program.
Application:
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. |
Technical
Guidance:
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. Additional information on the
232 Lean Process is available on www.fha.gov under the Health Care Facilities
or you may send any questions to: LeanThinking@hud.gov.
Program Accomplishments:
In fiscal year 2008, the Department insured mortgages for 189 projects with 21,679
beds/units, totaling $1.2 billion.