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HUD SECTION 232/241(a) – Lean Processing

Supplemental loans for the expansion or renovation of existing skilled nursing, assisted living or memory care facilities with HUD-insured loans.

Program Features

  • Used when it is not feasible to refinance a project’s HUD-insured loan because the current loan has a favorable interest rate or because prepayment is still subject to a lock-out or is prohibitively expensive.
  • Combines construction and permanent financing into a single transaction approved at the same time.
  • Maximum insurable loan is generally the lesser of:  a) 90% of the cost of the improvements; b) 90% of the increase in value after the completion of the improvements; c) an amount supported by a 1.45 debt service coverage (DSC) ratio; or, d) an amount based on total indebtedness.   
  • Loan is pre-payable, assumable and non-recourse.
  • The supplemental loan is typically cross defaulted with the existing HUD-insured loan and shares the same collateral.


Application Fee to HUD
Up Front Mortgage Insurance Premium to HUD (Reduced to .25% for Green Energy Efficient Projects)
Inspection Fee
Maximum Financing (Origination) Fee
Maximum Placement Fee
Costs of Issuance for Tax-Exempt Bond Transactions

An annual 0.55% Mortgage Insurance Premium (.45% for Tax Credit Projects and .25% for Green Projects) is paid to HUD as part of the monthly mortgage payment.


  • Replacement reserve escrow for on-going replacement of depreciable items is required for the term of the loan.  The amount of the annual deposit will be revised after 10 years based on a capital needs assessment.
  • Working capital deposits or operating deficit escrows are generally not required unless the project involves the addition of new beds.