Navigate HUD requirements with confidence. Maximize leverage, optimize terms, and secure non-recourse financing for your senior housing and care portfolio with expert FHA 232 refinancing advisory.
HUD has published Draft Handbook 4232.1 REV-2 for industry feedback. While these changes are not yet effective, staying informed helps you prepare for upcoming program modifications.
Industry Feedback Deadline: March 7, 2025 | Status: Draft - Subject to Change
The current effective handbook (January 19, 2017) governs all Section 232 transactions today. All underwriting criteria, program requirements, and processing procedures on this page reference the current handbook unless otherwise noted.
HUD is soliciting industry feedback on proposed handbook revisions. These changes are not yet effective and may be modified before final implementation. Feedback deadline: March 7, 2025.
Based on preliminary review of Draft Handbook 4232.1 REV-2, the following areas show proposed modifications. These are not final and do not affect current transactions.
General Program Requirements Updates
The draft includes revisions to Chapter 2 (General Program Requirements) with potential modifications to eligibility criteria, project classifications, and program scope definitions.
What This Means: Stay informed about potential changes to which properties qualify and how projects are classified under Section 232 programs.
Repairs & Rehabilitation Standards
Draft revisions may affect how critical and non-critical repairs are defined and processed in 223(f) transactions. HUD previously proposed changes but restored longstanding practices after industry feedback in April 2025.
What This Means: The treatment of repairs in refinancing may evolve. Current practice (critical repairs completed before closing, non-critical repairs escrowed) remains in effect until final handbook revision.
Processing & Underwriting Procedures
Draft handbook may include updates to documentation requirements, underwriting workflows, and HUD approval timelines beyond the Express Lane program.
What This Means: Application preparation and submission processes may change. Working with experienced advisors ensures you stay current with evolving requirements.
Stay Ahead of Regulatory Changes
Regulatory changes can significantly impact your financing strategy, timeline, and transaction structure. Our advisory services include continuous monitoring of HUD policy updates, mortgagee letters, and handbook revisions to ensure you're prepared for changes before they take effect.
Last Updated: January 2025 | Source: HUD Draft Handbook 4232.1 REV-2 (pending industry feedback through March 7, 2025)
HUD launched the Express Lane in June 2025 to dramatically reduce processing times for low-risk, low-leverage Section 232/223(f) refinancing transactions. Qualified deals can receive firm commitment in just 10-15 days instead of the traditional 150 days.
Standard Express Lane timeline from application to firm commitment for qualified transactions
Best-in-class processing for highly qualified deals, saving 4-5 months compared to traditional timeline
Conservative underwriting criteria ensure stable, high-quality operators receive expedited approval
To qualify for HUD's Express Lane processing, your Section 232/223(f) refinancing transaction must meet all of the following requirements:
Maximum 70% Loan-to-Value (LTV)
Conservative leverage requirement to ensure low-risk profile for expedited processing
DSCR: 2.0x for SNF / 1.6x for Non-SNF
Higher debt service coverage ratios than standard FHA 232 underwriting (1.45x) to qualify for fast-track approval
Quality of Care Standards
SNFs must have minimum 2-star overall and 2-star health inspection rating on Medicare.gov with no 'Red Hand' abuse indicators or serious violations within past year
Operator Tenure: 2+ Years
Facility operator must have been in place for at least two years prior to application submission to demonstrate stability
Loan Amount Cap: $50M ($70M NYC)
Mortgage amount cannot exceed $50 million ($70 million for greater New York City area)
Ready-to-Underwrite Application
Complete application package must be submission-ready with all documentation allowing immediate firm commitment decision
Clean FHA History
No history of FHA insurance claims or defaults on FHA loans
Limited Special Use Revenue
No more than 20% of facility's revenue attributed to special use purposes
Expert Advisory for Express Lane Qualification
Qualifying for Express Lane requires strategic preparation and precise application packaging. Many senior housing operators have strong fundamentals but need expert guidance to structure their refinancing to meet HUD's stringent Express Lane criteria. Our advisory services help you:
Note: HUD's Office of Healthcare Programs may modify Express Lane criteria in the future. We monitor program updates and ensure our clients benefit from the latest expedited processing opportunities.
Already have an FHA 232 loan? The IRR program offers streamlined refinancing to reduce your rate and extend your term in just 60-90 days—without full underwriting.
Close in 60-90 days vs 9-12 months. Streamlined underwriting with minimal documentation required.
Reduced closing costs, no appraisal required, and lower processing fees than full refinancing.
Add up to 12 years to your remaining loan term, improving cash flow and debt service coverage.
FHA 232 loans offer unmatched terms for senior housing and care operators looking to refinance and optimize their capital structure
Maximize leverage with FHA 232 refinancing at up to 90% loan-to-value for skilled nursing and 85% for assisted living facilities (HUD Handbook 4232.1, Section II, Chapter 3)
Lock in long-term fixed-rate financing with 35-40 year fully amortizing loans depending on program type for predictable cash flow
Protect personal assets with non-recourse financing structure available through FHA 232 programs
Available for skilled nursing facilities, assisted living, memory care, board and care, and rental-model continuing care retirement communities
Understanding which FHA 232 program is right for your refinancing needs
Purchase or refinancing of existing facilities without substantial rehabilitation
Best For:
Refinancing existing debt or acquisition financing for stabilized properties
Streamlined refinancing of existing FHA-insured debt
Best For:
Rate and term refinancing for facilities with existing FHA debt seeking lower rates
Ground-up construction of new senior housing facilities
Best For:
Developers building new skilled nursing or assisted living facilities
Major renovations where hard costs exceed 25% of post-completion value (not including major movable equipment or addition costs). HUD has eliminated the previous major building components qualification path.
Best For:
HUD Handbook Reference
All FHA Section 232 programs are governed by HUD Handbook 4232.1 (Healthcare Mortgage Insurance Program, Effective January 19, 2017), which provides comprehensive guidance on legal authority, underwriting standards, processing procedures, and closing requirements for healthcare facility financing. All loan parameters and requirements are subject to HUD approval and current program guidelines as outlined in 24 CFR Part 232.
Understanding HUD's financial requirements for FHA 232 refinancing approval per Handbook 4232.1
Minimum 1.45x (includes MIP in calculation)
Per HUD Handbook 4232.1, Section II, Chapter 3.2. Lower ratios require substantial justification and mitigation. Calculated using net operating income divided by total debt service including mortgage insurance premium.
SNF/ILU: 80-85% | ALF: 75-85%
Per HUD Handbook 4232.1, Section II, Chapter 3.2. For-profit borrowers: SNF/ILU 80%, ALF 75-80%. Non-profit borrowers may qualify for higher LTV ratios (up to 85%) with demonstrated track record.
$1.5M minimum to no statutory maximum
Maximum insurable loan amount determined by the lesser of: (A) Requested amount, (C) 90% of replacement cost, (D) LTV-based amount, (E) DSCR-based amount, per MILC calculation methodology.
Section 223(f): 35 years max | New Construction: 40 years max
Term limited to 75% of remaining economic life. Minimum 10-year term required. All loans must fully amortize through level annuity monthly payment (LAMP) structure.
6-12 months from application to closing
Timeline includes pre-application consultation, formal application, underwriting review, firm commitment issuance, and initial/final closing. 223(a)(7) streamlined refinancing may process faster.
Application: 0.3% of loan | Inspection: Varies | MIP: Annual premium
Application fee: $3 per $1,000 of requested loan amount. Inspection fee for 223(f): $30 per bed or 1% of repair costs if repairs exceed $3,000/bed. Mortgage Insurance Premium varies by program.
FHA Section 232 financing is available for a wide range of senior housing and care facilities that provide continuous protective oversight
Skilled Nursing Facilities (SNFs)
Typically 60-200 beds | Medicare/Medicaid certified facilities providing 24-hour nursing care
Assisted Living Facilities (ALFs)
Typically 40-150 units | Residential care facilities providing personal care services and support
Memory Care Communities
Typically 30-80 units | Specialized dementia care units with secured environment
Board and Care Homes
Typically 15-50 beds | Group residential facilities providing personal care and protective oversight
Continuing Care Retirement Communities (CCRCs) - Rental Model Only
Typically 100+ units | Multi-level care campuses operating on rental-only basis without entrance fees
Independent Living with Services
Typically 50-200 units | Senior apartments with supportive services and meal programs
⚠️ Critical CCRC Eligibility Requirement
Per HUD Handbook 4232.1, Section II, Chapter 2.3.A: Projects with "Founder's Fees," "Life Care Fees," or other similar charges associated with "Buy-in" projects are not eligible for FHA mortgage insurance.
Per HUD Handbook 4232.1, Section II, Chapter 5: Continuing Care Retirement Communities (CCRCs) must operate on a rental-only model without entrance fees or substantial upfront payments for occupancy. HUD does not insure facilities that require upfront fees or substantial down payments for occupancy.
Bottom Line: CCRCs with Type A, B, or C life care contracts that charge entrance fees, member equity structures, or cooperative ownership models are not eligible for FHA Section 232 insurance. Only rental-model CCRCs charging monthly fees qualify for the program.
Projects with entrance fees or 'buy-in' structures
HUD Handbook 4232.1, Section II, Chapter 2.3.A
Includes projects with 'Founder's Fees,' 'Life Care Fees,' or other substantial upfront payments for occupancy rights. CCRCs with Type A, B, or C contracts requiring entrance fees are not eligible.
Projects in or emerging from bankruptcy within 5 years
HUD Handbook 4232.1, Section II, Chapter 2.3.C
Projects where borrower, operator, or affiliates filed for or emerged from bankruptcy within the last 5 years, unless acquired by non-identity-of-interest owner in good standing.
CMS Special Focus Facilities
HUD Handbook 4232.1, Section II, Chapter 2.3.F
Skilled nursing facilities designated by Centers for Medicare and Medicaid Services as Special Focus Facilities due to quality concerns.
Facilities not providing continuous protective oversight
HUD Handbook 4232.1, Section II, Chapter 2.3.E
Projects providing only food and shelter without minimum assistance, such as retirement homes, boarding houses, or SRO residences.
Navigate the complex HUD approval process with expert guidance at every step
Pre-qualification analysis and lender selection
Assess property eligibility, borrower qualifications, and identify FHA-approved lenders experienced in Section 232 financing
Financial underwriting and pro forma modeling
Develop HUD-compliant financial projections, calculate DSCR and LTV ratios, and determine maximum insurable loan amount using MILC methodology
HUD application package preparation
Complete Form HUD-92013 application, compile financial exhibits, organizational documents, previous participation reviews, and all required supporting documentation
Market study and appraisal coordination
Engage HUD-approved appraiser to complete comprehensive market study and valuation report meeting Section 232 requirements
Firm commitment processing and due diligence
HUD reviews application, issues conditional commitment, borrower satisfies conditions, and firm commitment is issued authorizing loan closing
Closing coordination and post-closing compliance
Execute legal documents, fund escrows, obtain HUD endorsement, and ensure ongoing compliance with regulatory agreement and reserve requirements
Note: Section 232/223(a)(7) streamlined refinancing of existing FHA-insured loans may have expedited processing timelines compared to Section 232/223(f) refinancing, as certain underwriting requirements are waived or simplified per HUD Handbook 4232.1, Section II, Chapter 2.10.
Let's discuss your senior housing and care portfolio and identify opportunities to optimize your capital structure with FHA 232 refinancing.
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