Go to: Eligible Projects Loan Highlights Maximum Loans Application Procedure Fees & Assurances

Eligible Projects

This Program provides refinance and acquisition permanent loans for independent and assisted living facilities (ALF), special needs Alzheimer/dementia care facilities and skilled nursing (SN) facilities. Permanent loans are for a term of not greater than 35 years and not less than 10 years, however, not greater than 75% of the property's remaining economic life.

Three years must have elapsed since the facility was constructed or substantial rehabilitation was completed. ALF facilities must contain five units or more; SN must contain 20 beds or more. An ALF unit may contain bathroom and kitchen/kitchenette. ALF facilities must provide group dining facility. ALF/SN facilities may contain a non-resident day care facility, of which the net area may not exceed 20% of project net area. Facility must provide either restorative, maintenance, or social programs. All facilities must provide continuous protective oversight for all residents. Facilities may not charge entrance fees, founders fees, life care fees, or similar charges or fees. Professional management, acceptable to the lender is required. Commercial area that does not exclusively serve residents is permissible, but cannot exceed 10% of the total gross floor area in the project. The loan may include repair costs not to exceed 15% of the facility value after repairs or no more than $6,500 per unit (except in high cost areas). Repairs may not include replacing more than one major building system such as plumbing or electric.

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Loan Highlights

The loan is non-recourse with respect to personal liability. The interest rate is fixed, approximately 120 basis points over the 30-Year Treasury. The loan is assumable by qualified buyer approved by the lender ordinarily with a 1% fee of the loan balance. Prepayment is subject to terms of underwriting, typically, not prepayable for five years. Secondary debt is permitted in form of cash notes to 7.5% of value. Escrows required for property insurance, real estate taxes, MIP, replacement reserves for realty and major moveable equipment.

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Maximum Loans

Refinancing: At least 70% but not more than 85% of the MAI appraised value of the complex. The loan may exceed 70% if the existing mortgages and other outlays, including repairs, exceed 70%. If the outlays total less than 70%, the balance may be withdrawn as equity cash. Purchase: The lessor of 85% (90% for non profits) of sales price and all costs, or 85% of value of property after repairs. In no event may the annual debt service of the loan exceed 85% of net operating income.

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Application Procedure
Typically, before initiating the formal application procedure, First Housing, on behalf of clients, will request a preapplication meeting with HUD by submitting a package to HUD which will include among other items the following:

Sketch plan of site, typical unit plans, and typical elevation. Location map. Market study dated within 120 days of pre-application conference. Environmental Factors Checklist. Phase I Environmental Assessment. If purchase, a copy of purchase agreement or option. Latest state agency(s) report on project operations (if applicable). Current provider agreement for Medicare/Medicaid (if applicable). Description of property condition, list of repairs made in last two years, list and cost of proposed repairs. Current census information. Most recent 12 month financial statement and year-to-date statement. Current resumes for mortgagor, principals, management agent or operator.

HUD will invite to the Firm Commitment stage those projects which are approved at the preapplication meeting. A Firm Commitment application requires a detailed review of the project's historical operations; mortgagor and principals; management agent/operator; and feasibility of proposed financing. All information, instructions and forms for the formal application package will be supplied by First Housing. Closing can take place within a month from issuance of the Firm Commitment.

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Fees and Assurances

Application Fee: 0.3% (three/tenths of a percent) of the mortgage to be submitted with the application and pays certain processing costs. May be financed in the mortgage.

Financing Fee: Up to 3.5% paid at closing. May be financed in the mortgage.

Mortgage Insurance Premium: A first year MIP of 1% is payable at closing. This payment may be financed in the mortgage. An annual MIP of 50 basis points is payable thereafter.

Repair Escrow: If closing is requested prior to completion of required repairs, an escrow of 150% of remaining repair costs must be established. Repairs must be completed within twelve months of mortgage closing.

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