What is the HUD 232 Program?

HUD 232 Program Overview

The HUD 232 Program is a loan insurance program administered by the U.S. Department of Housing and Urban Development (HUD) through the Federal Housing Administration (FHA). It is specifically designed to help finance the construction, rehabilitation, acquisition, or refinancing of healthcare and senior housing facilities, such as:

• Skilled nursing facilities (SNFs)
• Assisted living facilities (ALFs)
• Board and care homes
• Intermediate care facilities

Key Features of the HUD 232 Program

1. Government-Backed Loan Insurance
   • HUD insures loans made by approved lenders, reducing risk for lenders and allowing borrowers to access lower interest rates.
2. Long Loan Terms
   • Up to 40 years for new construction or substantial rehabilitation.
   • Up to 35 years for existing properties being refinanced or acquired.
3. Non-Recourse Financing
   • Borrowers are not personally liable beyond the property itself, protecting their other assets.
4. Fixed Interest Rates
   • Since these are FHA-insured loans, they generally come with long-term, low fixed interest rates.
5. High Loan-to-Value (LTV) Ratios
   • Typically 80-85% LTV for for-profit entities.
   • Can be as high as 90% LTV for non-profits.
6. Debt Service Coverage Ratio (DSCR)
   • Generally requires a minimum DSCR of 1.45x to ensure financial stability.
7. Davis-Bacon Wage Requirements
   • If the project involves new construction or substantial rehab, Davis-Bacon prevailing wage laws apply.
8. HUD 232/223(f) for Refinancing
   • A variation of the program, HUD 232/223(f), allows for refinancing and acquisition of existing healthcare facilities.

Benefits of the HUD 232 Program

• Lower financing costs due to HUD backing.
• Long amortization periods reduce monthly debt service.
• Non-recourse nature protects borrower assets.
• Can be used for new developments, renovations, or refinancing.

Who is Eligible?

• For-profit and nonprofit owners/operators of eligible healthcare facilities.
• Facilities must meet state licensing and certification requirements.
• Owners must have experience managing healthcare properties or bring in a qualified operator.