FHA Section 232 Handbook Updated
The U.S. Department of Housing and Urban Development (HUD)/Federal Housing Administration (FHA) has released an update to its Sec. 232 Handbook that proposes important changes that should greatly benefit seniors housing and care providers seeking debt financing.
The updated Handbook contains clarification on eligible indebtedness; specifically, an elimination of the two-year seasoning rule in certain instances. High quality, stable cash-flowing projects that previously were subject to debt seasoning for two years may be immediately eligible to seek HUD financing under the proposed changes. This applies to immediate HUD refinancing of bridge loans used for recapitalizations up to a 70% loan-to-value (LTV) max.
“We applaud HUD for their
work on updating the Handbook. A lot of hard work went into this and their
efforts in revising the guidance have been exemplary,” said Kass Matt,
president at Lancaster Pollard. “These changes should enable HUD to continue to attract
high quality operators with high quality assets, which is a win for both
HUD and the borrowers. We are excited to put the new rules to work for our
Under the updated guidance, debt
eligibility and seasoning definitions may be broadened to allow for more
immediate refinancing of project-related debt in the operator’s name. In
addition, bridge financing may be used for identity of interest (IOI) purchases
and partner buy-outs. Both of these options would be subject to HUD’s review. Eligible
indebtedness and LTV requirements will vary depending on the
specific circumstances of a transaction.
Overall, the new Handbook is
designed to make it easier for strong projects to enjoy the benefits of
long-term debt financing under the Sec. 232 program. The Handbook is not yet
effective as it is currently under a comment period that ends June 1, 2016.