Questions & answers

Section 223(f) insures the refinance or acquisition of existing multifamily rental housing — apartments. Section 232 insures residential care facilities: skilled nursing, assisted living, board and care, and memory care. They are administered by different HUD offices, processed under different protocols (MAP versus LEAN), governed by different handbooks, and priced differently.

The distinction matters more than the shared statutory home suggests. Healthcare properties require 1.45x coverage against 1.15x for market-rate apartments, carry lower leverage ceilings, pay substantially higher mortgage insurance premiums, and cannot take cash-out at all.

No. HUD insures the loan; a HUD-approved private lender originates, underwrites and services it. On multifamily that lender holds MAP approval; on healthcare, LEAN approval. The insurance is what allows the lender to offer a 35-year fixed-rate non-recourse loan, because the credit risk is substantially borne by FHA and the loan is funded through the GNMA securities market.

Existing multifamily rental housing with five or more units: market-rate, affordable, LIHTC and rent-subsidized properties, and some age-restricted properties. Commercial space is limited to 25% of net rentable area and 20% of effective gross income. The borrower must be a single-asset entity, for-profit or non-profit.

No — that requirement was superseded in March 2020. A property that has not reached three years from its final certificate of occupancy can still qualify, at a tightened coverage standard: 1.17x DSCR market-rate or 1.11x broadly affordable, demonstrated over three consecutive months pre-endorsement. If cash-out is taken, 50% of proceeds are held back until a six-month coverage test is met.

Many websites still publish the old flat rule. It does not apply to Section 232, which has its own debt seasoning regime.

There is no statutory minimum, but lenders set practical floors because the fixed costs of an FHA transaction — third-party reports, legal, application fee — do not scale down well. Published figures vary widely and we have seen the same company quote $1 million, $2 million and $3 million on different websites. Ask the specific lender; expect the practical floor to sit in the low millions.

The maximum insurable mortgage is the lowest result among several independent tests — not the highest, and not an average. Those tests include the requested amount, the LTV criterion, the DSCR criterion, the statutory per-unit limits and the applicable cost test.

Current LTV and DSCR maximums: market rate 87% and 1.15x, affordable 90% and 1.11x, 90%-or-more rental assistance 90% and 1.11x. Acquisitions are capped at 80% of cost; any cash-out at 80% of value. On a high-value property the statutory per-unit limit frequently binds before LTV does.

Not necessarily the affordable tier. A LIHTC property qualifies for the middle tier only if its restricted rents carry an advantage relative to achievable market rents. LIHTC without that advantage is underwritten as market rate, at 87% and 1.15x with a 7% vacancy floor.

The appraisal establishes this, which means the tier may not be certain until the appraisal is in. Ask your lender at the term sheet stage which tier they are sizing to and what happens if the appraisal concludes otherwise.

Because HUD requires a minimum vacancy in underwriting regardless of actual performance — 7% market rate, 5% affordable, 3% for 90%-rental-assisted properties — and underwritten NOI drives the coverage test. A property running 3% physical vacancy underwritten at 7% takes a four-point haircut to income that exists only on paper. The vacancy floor often moves sizing more than the coverage ratio does.

The lowest of the LTV test, the DSCR test at 1.45x, and a purchase-cost or refinance-cost test. Maximum LTV is generally 80% for-profit and 85% non-profit for skilled nursing; existing assisted living and board and care is 80%; new assisted living is 75% for-profit and 80% non-profit.

On healthcare deals the coverage test binds far more often than LTV, which is why experienced healthcare borrowers discuss their transactions in coverage terms rather than leverage terms.

Sometimes, and not automatically. The higher non-profit benchmarks require a demonstrated successful operating track record, significant operating and management experience, and a solid financial track record. A newly formed non-profit does not receive 85% leverage by virtue of its tax status.

Yes, capped at 80% LTV. Note that Mortgagee Letter 2025-03 raised market-rate leverage to 87% but expressly did not change the cash-out criterion — cash-out stayed at 80%. A borrower who models 87% and plans a distribution against it has misread the letter.

Also note that 'cash-out' does not require that you receive a check. If the insured loan exceeds the eligible costs of the refinance, the excess is cash-out and the 80% ceiling applies to the whole loan.

No. The Section 232 handbook states that HUD does not permit insured loan proceeds to be used directly for an equity takeout on Section 232 transactions. There is no LTV band at which it becomes available and no structure that works around it.

Several widely read websites say otherwise, and at least one lender term sheet presents the debt-seasoning exception matrix as though its LTV tiers were cash-out tiers. They are not. If liquidity is the objective on a healthcare asset, FHA is the wrong tool and should be ruled out early rather than after an application fee has been spent.

Payoff of existing project debt including prepayment penalties, transaction and closing costs, HUD-approved repairs with a completion assurance escrow, and the initial replacement reserve deposit. The refinance must also lower monthly debt service. Anything supportable beyond those uses does not go to the borrower — the loan is sized down.

Generally not yet, on the healthcare side. If the purchase was within three years, the transaction is typically ineligible for the reduced-seasoning exception and existing debt is generally capped at 80% of the purchase price for sizing purposes. Combined with the cash-out prohibition, the value you created stays in the deal until the window runs.

Mortgage insurance premium, charged in an upfront component and an annual component calculated on the outstanding balance. Multifamily programs are now a uniform 0.25% upfront and 0.25% annual — down from 1% and 0.60% on a 223(f) — for applications submitted or amended on or after October 1, 2025 that have not been initially endorsed.

No. Section 232 and Section 242 appear nowhere in the September 2025 notice. Healthcare premiums were set by a separate notice and did not change: 232/223(f) is 100 basis points upfront and 65 annual; 232/223(a)(7) is 50 and 55; 232 new construction and substantial rehabilitation is 77 and 77.

We have found current lender term sheets applying 0.25% to healthcare programs. That overstates proceeds, because MIP sits in the denominator of the coverage calculation that sizes the loan.

Not on the existing loan — a loan that has been initially endorsed cannot be repriced and upfront MIP paid at the old rate is not refunded. The route is a new transaction, usually a 223(a)(7) streamline, where MIP also dropped to 0.25%/0.25%. On an apartment loan paying 60 basis points annual, that captures a 35 basis point saving on the premium alone, which can carry the transaction costs by itself.

Eliminated — for multifamily by the September 2025 notice, and for Section 232 programs for applications received on or after August 25, 2025. For apartments the practical effect is neutral, since the green rate was 25 basis points and the universal rate is now also 25. For healthcare it is a straight increase.

Obligations documented into loans already closed under the incentive — certification maintenance, annual energy reporting, regulatory riders — generally continue. Have counsel read the rider.

Up to the substantial rehabilitation threshold, which for 2026 is a base of $20,406 per unit, multiplied by the high-cost percentage for the property's area — up to 270% in standard areas, 315% in designated High Cost Areas, capped at 405% in Alaska, Hawaii, Guam and the U.S. Virgin Islands.

Nearly every published figure in the industry is anchored to a $15,000 base set in 2016, which understates capacity by roughly a third. The threshold indexes annually and has to be computed for the actual property location.

Aggregate cost — the repairs, the associated fees, and the completion assurance escrow. A scope that looks comfortably under the threshold on contractor pricing alone can breach it once those are added, which is an unpleasant discovery late in an application.

The transaction moves to 221(d)(4) substantial rehabilitation — a real program with higher leverage against cost, but a different transaction: Davis-Bacon prevailing wages apply, the timeline lengthens considerably, and construction administration becomes part of the deal. A scope just over the line can sometimes be re-sequenced, with some work funded outside the FHA transaction. That conversation belongs with your lender and CNA provider early.

An initial deposit at closing set by the Capital Needs Assessment, generally mortgageable, plus an ongoing deposit of at least $250 per unit per year — a floor, not a typical figure. The CNA is refreshed on a ten-year cycle for the life of the loan, and a refresh can raise the required deposit. On a 35-year loan that happens three times, which long-hold underwriting should model rather than assuming a flat deposit.

Realistically about five to six months from engagement to initial endorsement for a clean, well-prepared market-rate refinance. Published estimates range from 60 days to twelve months because publishers measure different things.

Third-party reports — appraisal, CNA, Phase I — are the most common bottleneck and are partly buyable by ordering early. HUD's review queue is not within the lender's control. Critical repairs that must be completed before closing can add a construction sequence. Healthcare transactions run longer because of operator and licensure diligence.

On 223(f): an application fee of 0.30% of the loan amount, reduced in Opportunity Zones; an inspection fee of $30 per unit, 1% of repairs, or a flat fee depending on the repair level; and an assumption fee of 0.05% if the loan is later assumed. On 232/223(a)(7) the application fee is 0.15%. Lender fees, third-party report costs, legal and a rate lock deposit of commonly 0.50% (refunded at closing) are separate.

Not fees, and not lender league-table position. What correlates with speed is the completeness and accuracy of the application at submission, because a package that triggers rounds of HUD questions loses weeks per round. Where the existing loan is already FHA-insured, a 223(a)(7) is materially faster because it skips the appraisal.

Yes, subject to bad-boy carve-outs under which key principals accept personal liability for specified acts — fraud, misrepresentation, misapplication of funds, unauthorized transfers, voluntary bankruptcy. These are not performance guarantees. A property that underperforms because the market turned does not trigger them.

Yes, with HUD and lender approval, on payment of 0.05% of the loan amount to HUD. If the coupon is below market, that makes the debt an asset to a buyer and part of the price. Approval is a real process — HUD reviews the transferee's experience and financial capacity, and on healthcare the operator's qualifications and licensure — so it is a transaction, not a closing item.

Typically ten years of call protection, commonly a step-down beginning at 10% of the balance in year one and declining one point annually. After the period expires the loan is openly prepayable — no yield maintenance, no defeasance — for the remaining term. Alternative structures are negotiable.

If the intended hold is shorter than the protection period, the structure is working against the plan, and the honest answer may be that a shorter conventional or agency execution fits better.

Monthly escrows for taxes, insurance, MIP and replacement reserves; audited annual financial statements within 90 days of fiscal year end; distributions only from surplus cash as HUD defines it (permitted as often as monthly per ML 2022-16, which changed frequency not the test); REAC physical inspections; the CNA refresh every ten years; and compliance with the Regulatory Agreement, which governs operations, distributions, transfers and refinancing for the life of the insurance.

Yes, as a surplus cash note. Combined LTV is generally capped at 92.5% unless the subordinate source is governmental. Payments under Form HUD-92223M are capped at 75% of surplus cash, and that cap is an aggregate across all subordinate debt, not a limit per note — something sponsors layering more than one subordinate note sometimes miss.

Look at the MIP line first; it is the most reliable tell. 1% upfront and 0.60% annual on a 223(f) means the document predates October 2025. 0.25%/0.25% on a Section 232 program means the author applied the wrong notice. A DSCR of 1.176x or an LTV of 85% on market-rate 223(f) means it predates January 2025. A $15,000 repair threshold is a decade old.

Most lender term sheets carry no date at all. Filename or footer codes often encode a month and year, which is an inference rather than a date but is usually the only signal available.

Three questions. What is the annual MIP on this program and which notice sets it? What DSCR applies if the property received its certificate of occupancy fourteen months ago? What is the substantial rehabilitation threshold for this property's market this year?

Current answers: the rate with a Federal Register citation; 1.17x for three consecutive months with a 50% cash-out holdback; $20,406 base times the local high-cost percentage.

A draft mortgagee letter posted to HUD's drafting table in February 2026 would revise the MAP Guide substantially — 95% economic occupancy for qualifying 223(f) transactions, a $1 million cap on cash-out holdbacks, Firm Commitment validity extended from 60 to 90 days, a mortgageable contingency, elimination of the CPA review requirement, and elimination of the large-loan segment. It is a draft and not effective.

HUD has also posted Rev-2 redlines to Chapters 2 and 3 of the Section 232 Handbook, touching seasoning and loan sizing. Underwrite to current guidance; know the pending changes because they affect timing decisions.

HUD mortgagee letters, Federal Register notices, the MAP Guide (Handbook 4430.G) and the Section 232 Handbook (4232.1), each cited on the page where it is used. We re-verify against HUD's numbered mortgagee letter list, the Federal Register and HUD's drafting table on a recurring schedule, and we date every page.

Be aware that many numbered mortgagee letters are single-family only and do not apply to multifamily or healthcare at all — a frequent source of confusion. If you find something here that has gone stale, tell us.