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 clients.”


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.  

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