Major updates to the FHA 232 loan program in 2025 include dramatic mortgage insurance premium reductions and simplified rate structures. Learn what these changes mean for healthcare facility developers and operators.

LEBELL ADVISORY NEWSLETTER
Senior Housing & Care Finance Insights
Q4 2025 | Program Updates

From the Desk of Justin LeBell

Dear Industry Colleagues,

The FHA 232 loan program has undergone its most significant transformation in nearly a decade. These changes—including dramatic reductions in mortgage insurance premiums and simplified rate structures—represent a major opportunity for healthcare facility developers and operators.

This special edition newsletter breaks down the key program updates, policy shifts, and practical implications for your financing decisions. Whether you're planning new construction, considering refinancing, or evaluating your capital stack, understanding these changes is essential.

Justin LeBell
Principal, LeBell Advisory

Recent Changes to the FHA 232 Loan Program: What Healthcare Facility Developers Need to Know

The FHA 232 loan program, which provides financing for senior housing and healthcare facilities, has undergone significant changes in 2025. These modifications aim to reduce costs, simplify the application process, and stimulate development in the healthcare real estate sector.

MAJOR MORTGAGE INSURANCE PREMIUM REDUCTIONS

The most substantial change to the FHA 232 program involves dramatic reductions in mortgage insurance premiums. In response to rising construction costs and elevated interest rates since 2021, HUD has streamlined its premium structure.

The New MIP Structure

As part of broader changes to FHA multifamily insurance programs, HUD reduced mortgage insurance premium rates to 0.25% for all multifamily housing programs, effective October 1, 2025. This represents a significant departure from the previous tiered system that included multiple rate categories.

Previously, healthcare facilities faced annual MIP rates ranging from 0.45% to 0.77% depending on their classification. Under the new structure, all Section 232 projects now benefit from the uniform 0.25% rate, regardless of whether they include green certifications or affordable housing components.

Rationale for the Changes

Market data revealed that from March 2024 to March 2025, only 4% of certain FHA loan closings were for market rate properties without green or affordable incentive qualification, suggesting that the previous rate structure had created severe underutilization. The high costs associated with market-rate property premiums had become prohibitive, limiting program effectiveness.

HUD determined that the 2016 approach of specifying premium rates across four categories and multiple loan programs, resulting in 35 individual rates, was overly complicated and burdened decision-making for borrowers and lenders. The simplified across-the-board rate is designed to make cost-benefit analysis more straightforward for all parties.

ELIMINATION OF GREEN MIP CATEGORY

In a parallel policy shift, HUD eliminated the Green and Energy Efficient MIP category specifically for Section 232 healthcare facilities, effective August 25, 2025.

Background on Green Incentives

In 2022, HUD had introduced reduced MIP rates for healthcare facilities meeting specified energy and water usage reduction requirements. These green certifications had offered annual premiums as low as 0.25% for qualifying projects, intended to promote environmental sustainability and climate change initiatives.

Policy Reversal

Following President Trump's January 20, 2025 Executive Order titled "Unleashing American Energy," which shifted agency priorities away from policies promoting green and energy efficient goals, HUD reconsidered this incentive structure. The department determined that competitive market forces in the residential care facility industry would naturally incentivize energy-efficient choices where they enhance indoor air quality and resident comfort.

Transition Period: Projects that had already submitted applications for the reduced Green MIP rate before August 25, 2025, will still be processed under those favorable terms if they meet program requirements. This transition period acknowledges that lenders and borrowers may have already invested significant resources into green applications.

CURRENT MIP RATES BY LOAN TYPE

Following these changes, Section 232 healthcare facilities now operate under the following structure:

New Construction/Substantial Rehabilitation:

0.77% upfront capitalized MIP
0.77% annual MIP for facilities without LIHTC
0.45% annual MIP for facilities with LIHTC

232/223(f) Refinancing:

1.00% upfront capitalized MIP
0.65% annual MIP for facilities without LIHTC
0.45% annual MIP for facilities with LIHTC

232/223(a)(7) Refinancing:

0.50% upfront capitalized MIP
0.55% annual MIP for facilities without LIHTC
0.45% annual MIP for facilities with LIHTC

Important Note: With the broader multifamily program changes reducing rates to 0.25% across the board, borrowers should consult with their lenders about which rate structure applies to their specific applications.

IMPACT ON HEALTHCARE FACILITY DEVELOPMENT

These changes carry significant implications for the healthcare real estate market:

Direct Cost Savings

Lower mortgage insurance premiums directly reduce financing costs, potentially making projects more economically viable. The simplified rate structure also removes strategic considerations about pursuing specific certifications or classifications solely for premium reductions.

Quantifying the Savings

For developers considering Section 232 financing, the reduced premiums could translate to hundreds of thousands of dollars in savings over the life of a loan.

Example: On a $20 million loan, the difference between a 0.77% annual MIP and a 0.25% MIP represents $104,000 in annual savings.

Market Rebalancing

The uniform rate structure should encourage development across all healthcare facility segments, addressing the previous imbalance where program utilization had become heavily skewed toward projects qualifying for incentive categories.

LEAN PROCESSING CONTINUES

While significant changes have occurred in premium structures, the HUD 232 LEAN processing system remains in place. Developed in 2008 and based on Toyota's operational model, LEAN processing streamlines the application process through:

Standardized checklists
Lender templates
Elimination of duplicate documentation requirements

Timeline: LEAN transactions for FHA 232 loans typically take a year from application to closing, though this varies based on application complexity. The system continues to reduce waste and improve efficiency in the underwriting process, making it easier for qualified borrowers to access financing.

WHAT THIS MEANS FOR BORROWERS

Healthcare facility developers and operators should consider several factors when evaluating FHA 232 financing under the new rules:

1. Cost Savings

The reduced MIP rates make FHA 232 financing more competitive with alternative financing sources. Projects that were previously marginally feasible may now pencil out more favorably.

2. Simplified Decision-Making

Without the need to pursue specific green certifications or affordable housing designations to access lower premiums, developers can focus on project fundamentals rather than structuring deals around premium incentives.

3. Market Rebalancing

HUD explicitly seeks to rebalance loan program utilization, which had become heavily skewed toward projects qualifying for incentive categories. The uniform rate structure should encourage development across all healthcare facility segments.

4. Timing Considerations

For applications submitted or amended on or after October 1, 2025, the new 0.25% multifamily rate should apply, as long as the loan has not been initially endorsed. Borrowers should work closely with their lenders to understand which rate structure governs their specific applications.

LOOKING AHEAD

These policy changes reflect HUD's response to current market conditions and its mandate to deliver price relief while expanding housing supply. The dramatic reduction in mortgage insurance premiums represents one of the most significant changes to the FHA 232 program in nearly a decade.

Expected Market Impact

As the healthcare real estate market adapts to these new parameters, we may see increased activity in the sector. Lower financing costs could encourage development of much-needed senior housing and healthcare facilities, particularly in underserved markets where previous premium structures made projects uneconomical.

LEBELL ADVISORY CAN HELP

Navigating the FHA 232 loan program requires specialized knowledge and established lender relationships. LeBell Advisory provides comprehensive support for healthcare facility financing:

Program Expertise – Deep understanding of FHA 232 requirements, processing, and underwriting standards
Lender Relationships – Established connections with MAP-approved lenders experienced in healthcare underwriting
Strategic Guidance – Analysis of how program changes affect your specific projects and financing strategy
Transaction Support – Full-service guidance through the application and closing process

Contact us to discuss how these program changes create opportunities for your development or refinancing plans.

READY TO DISCUSS YOUR PROJECT?

Whether you're planning new construction, considering refinancing, or evaluating your capital options, LeBell Advisory can help you navigate the updated FHA 232 program.

Schedule a Complimentary Consultation

We'll discuss:

How the new MIP rates affect your project economics
FHA 232 program requirements and eligibility
Alternative financing options and comparative analysis
Strategic timing and execution approach

Contact Information

Email: justinlebell@outlook.com
Web: LeBell Advisory
Phone: (801) 205-9901

Serving: California, Oregon, Washington, Arizona, Nevada, Utah, and beyond

ABOUT LEBELL ADVISORY

LeBell Advisory provides specialized debt advisory and capital markets services to senior housing and care property owners and operators. We help clients navigate complex financial decisions—from development feasibility to capital placement to strategic planning.

Our focus on senior housing, combined with deep western markets knowledge and established lender relationships, enables us to deliver results that move organizations forward.

Core Services:

Debt Advisory & Capital Placement – Comprehensive financing solutions and lender placement
Market Feasibility & Demand Analysis – Strategic market insights and demographic analysis
Valuation & Transaction Support – Expert guidance through acquisitions and sales
Strategic Planning & Portfolio Optimization – Long-term growth and sustainability planning
FHA 232 Program Guidance – Specialized support for HUD-insured healthcare facility financing

LEBELL ADVISORY
Senior Housing & Care Financial Advisory

This newsletter is for informational purposes only and does not constitute financial or legal advice. Borrowers should consult with qualified professionals and review current HUD guidance for the most up-to-date program requirements.

LeBell Advisory Newsletter | Recent Changes to the FHA 232 Loan Program