Commercial Real Estate Division
Commercial Real Estate - HUD FHA 242
FHA 242 Construction, Rehab, Modernization or Expansion for Hospital and Acute Care Facilities:
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Purpose:
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The Section 242 program is administered by the Office of Hospital Facilities (OHF) within the Office of Healthcare Programs. Section 242 of the National Housing Act provides insured mortgages for construction, rehabilitation, expansion or modernization of acute care hospital facilities ranging from large teaching institutions to small rural critical access hospitals.
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Maximum Loan Amount:
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​​90% of the lesser of the appraised value or costs of development.
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Maximum CLTV:
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100% is possible with Joint Venture
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Eligible Locations:
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All 50 states, Puerto Rico, U.S. Virgin Islands, and Guam.
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Fixed Rate Term:
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Up to 25 years.
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Minimum DSCR:
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1.25.
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Prepayment Penalty:
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Negotiable - typically a two-year lock out followed by a step down premium (e.g. 8,7,6,5,4,3,2,1).
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Guarantee:
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Non-recourse for most loans subject to standard carve-outs.
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Assumable:
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Yes, subject to lender approval.
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Escrows:
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Replacement reserves required in accordance with HUD guidelines;
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Taxes and Insurance escrowed monthly (post construction);
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Working Capital Reserve equal to 4% of loan amount (post in cash or LOC);
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Operating Deficit Reserve equal to 3% of loan amount, or greater as determined by HUD at commitment (post in cash or LOC).
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Third Party Reports:
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Appraisal, Market Study, Complete Project Construction Cost Breakdown, and Plans and Specs Review are required.
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Sponsor Requirements:
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Experienced owner operators.
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Minimum credit and financial capacity requirements.