Substantial Rehabilitation

HUD/FHA Section 232 Mortgage Insurance

Purpose

Attractive, long-term, fixed-rate loans for the refinancing or acquisition of nursing homes, intermediate care facilities, assisted living facilities, mental health and rehabilitation facilities, and board & care homes that require substantial rehabilitation. Projects may include combinations of the above levels of care.

Eligibility

Substantial rehabilitation involves: 1) repairs, replacement, improvements (including major movable equipment) and additions, the cost of which exceeds 15% of the after rehabilitation value of the property; or 2) replacement of two or more major building components.

Loan Features

• No personal recourse.
• Low, fixed-rate interest.
• Amortization based on the lesser of 40 years or 75% of the project's remaining economic life.
• Up to 90% loan-to-value (95% for non-profit borrowers).
• Fully assumable with negotiable prepayment provisions.
• Loan amount is the lesser of 90% of HUD appraised value, including major movable equipment (95% for non-profit), or the mortgage amount supported by 90% of the net income (95% for non-profit).

Requirements

• Prevailing wage rates (Davis-Bacon Act) must be paid under the rehabilitation contract.
• Audited certification of rehabilitation costs is required.
• Borrower must provide HUD with annual audited financial statements for the mortgagor entity each fiscal year after closing.
• Facilities requiring entrance fees are not eligible.