HUD SECTION 232/223(f) – Lean Processing
Loans for the refinancing or acquisition of existing skilled nursing, assisted living and memory care facilities.
- All project types generally are underwritten at an 80% loan-to-value ratio (LTV) and a 1.45 X debt service coverage (DSC).
- Loan is pre-payable, assumable and non-recourse; maximum term is 35 years with full amortization.
- Loan can include the cost of repairs, improvements, and an initial deposit to a reserve for replacement fund based on a fifteen year projection; however, the cost of repairs and improvements may not exceed 15% of the project’s value after repairs are completed or involve replacement of two or more major building components. Projects whose costs exceed these levels may qualify under Section 232.
- Projects must be at least three years old prior to filing an application and must not have been substantially rehabilitated within that period.
- Project debt incurred within two years of the filing of an application must be analyzed to determine program eligibility; project debt that is more than two years old does not require additional analysis.
- Prior loans whose proceeds included equity cash-outs could be immediately eligible for refinancing, depending upon the amount of the loan used for equity and the HUD-insured loan-to-value.
- If less than 50% of the prior loan was used for equity, and the HUD-insured loan does not exceed 70% of value, then no seasoning is necessary.
- If 50% or more of the prior loan was used for equity, and the HUD-insured loan does not exceed 60% of value, then no seasoning is necessary.
- If 50% or more of the prior loan was used for equity and the HUD-insured loan is 61% or more of value, then two years of seasoning is necessary.
- The seasoning period for prior loans – regardless of the use of proceeds – will remain two years if the HUD-insured loan is at least 71% or more of value.
- Debt associated with related-party purchases can be refinanced with a HUD-insured loan immediately instead of after a two-year seasoning period provided three conditions related to the sale are met:
- The seller has no residual rights to control the project;
- The seller has no residual rights to reacquire the project until not less than five years after the HUD-insured loan closing; and,
- The purchase must have occurred prior to the date the application for HUD mortgage insurance was filed.
- Facilities must comply with the State’s eligibility requirements concerning licensure.