HUD 242/223(f) Program - Acquisition or Refinance of Hospitals

Click to download the .pdf
Property Types

Acute Care Hospitals (at least 50% of total patient days must come from acute care services except for critical access hospitals)

Eligible Borrowers

For profit and non-profit entities (must demonstrate need and obtain CON if required by the state)

Loan Amount

No Minimum/No Maximum

Locations

Nationwide

Term & Amortization

Up to 25 years and fully amortizing

General Loan Terms

Maximum loan cannot exceed 90% Loan to Value

Interest Rate

Fixed rate, subject to market conditions at the time of rate lock

Recourse

None, except standard carve-outs

Assumable

Yes, subject to HUD approval

Prepayment

Typically loans are prohibited from prepayment for the 1st year, then have a 9% penalty declining 1% each year thereafter until 0%.  Alternative lockout and prepayment structures are available.

Mortgage Insurance Premium

1% at closing
0.60% annually

Professional Liability Insurance

HUD requires a minimum coverage of $1 million per occurrence and $3 million aggregate.  Waivers may be granted in cases where premiums are high and claim history is clean.

Other
  • Davis Bacon prevailing wages are required for new construction and substantial rehabilitation
  • 20% of the mortgage amount may be used for capital improvements and equipment
  • Escrows required for repairs, mortgage insurance premium, taxes, insurance, and replacement reserves
  • Third party reports include appraisal, Market Need and Financial Feasibility study, PCNA, and Phase I