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HUD Section 232 Handbook update proposes significant benefits to senior housing financing

The U.S. Department of Housing and Urban Development (HUD) released an updated version of its Section 232 Handbook, which covers the Healthcare Mortgage Insurance Program, including the LEAN processing system.  The proposed changes should make it easier for senior housing companies to obtain financing through HUD.  Such companies use the Section 232 program for all stages of a project, such as to finance purchases, new construction, rehabilitation, or refinancing.

HUD originally released the 232 Handbook in May 2014 with the hopes of eliminating some of the issues with navigating the program by providing a comprehensive guide to Section 232.  Some specific updates include, clarification on eligible indebtedness, specifically, an elimination of the two-year seasoning rule in certain scenarios.  So now, certain high quality projects that previously were subject to debt seasoning for two years may be immediately eligible to obtain HUD financing, including refinancing of bridge loans used for recapitalizations up to a 70% loan-to-value (LTV) max.  The updates also enable identity of interest and partner buy-out scenarios to be refinanced without two-year seasoning if they meet certain standards.

The draft Handbook is now in comment period through June 1; therefore, the changes are not yet in effect.  A copy of the draft Handbook can be found here.

 

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