FHA®
242, 242/223(f) and 242/223(a)(7)
Arbor provides FHA-insured loans for acute care hospital facilities ranging from large teaching institutions to small rural critical access hospitals. The FHA assists hospitals access affordable financing for capital projects. Uses include new construction, refinancing, and modernization, remodeling, equipment and expansion.
| Loan Term | 25 year permanent loan plus a construction period. |
| Amortization | Fully amortizing not to exceed 90% of remaining economic life. |
| Maximum Loan Amount | No limit on the amount that can be insured, subject to a loan-to-replacement cost of 90% or the costs to refinance in a 242-223(f). Hospitals may pledge existing assets to meet the loan-to-value test. |
| Fixed Rate | Fixed rate for the length of the mortgage. |
| Underwriting Criteria |
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| Program Selection Applicability |
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| HUD Inspection Fee |
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| Mortgage Reserve Fund | 0.2% of loan amount escrowed each year during years 1-10 of the loan term. |
| HUD Mortgage Insurance Premium (MIP) |
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| Eligible Borrower | The mortgagor shall be a public mortgagor (i.e., an owner of a public facility), a private non-profit corporation or association, or a profit-motivated mortgagor meeting the definition of “hospital” in §242.1. The mortgagor shall be approved by HUD and, except in those cases where the hospital is leased as permitted in §242.72, shall possess the powers necessary and incidental to operating a hospital. Eligible proprietary or profit-motivated mortgagors may include for-profit corporations, limited partnerships, and limited liability corporations and companies, but may not include natural persons, joint ventures, and general partnerships. Any proposed mortgagor must demonstrate that it has a continuity of organization commensurate with the term of the mortgage loan being insured. For new organizations, or those whose continuity is necessarily dependent upon an individual or individuals, broad community participation is required. |
| Recourse | Non-recourse. |
| Required Reports | Study of market need and financial feasibility, Phase I Environmental and Appraisal. |
| Prepayment | Negotiable, depending on the term and loan amount. |
| Expense Escrow | Yes – sufficient to cover Arbor’s expenses and third-party report costs. |
| Origination Fee | Negotiable |
| HUD Application Fee | A commitment fee that, when added to the application fee will aggregate $3 per $1,000 of the amount of the loan set forth in the commitment, shall be paid within 30 days of the date of issuance of the commitment. If such fee is not paid within this 30-day period, the commitment shall automatically terminate. |
| HUD Inspection Fee | 0.5% of the mortgage amount for new construction or sub-rehabilitation. Between 0.10% and 0.40% for 5% to 19% hard costs. |
| Legal/Closing Fee | Borrower pays Arbor’s counsel fee and miscellaneous closing costs. |
| Davis Bacon | Davis Bacon wage requirements apply to new construction and/or sub-rehabilitation. Not required on repairs pursuant to 242 / 223(f). |
| HUD Mortgage Insurance Premium | 0.70% of the loan amount for a 242. 0.65% for a 242/223(f). |
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