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Eligible Proposals: |
Hospital facilities (may involve elements such as garages and medical office buildings as long as the hospital is the holder of fee simple title).
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Loan Term: |
Construction term plus a maximum 25 year self-amortizing permanent loan.
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Loan Parameters:
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The loan amount is the lesser of:
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90% of HUD's estimate of value or project costs, and
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1.25% debt service coverage utilizing the FHA interest rate plus Mortgage Insurance Premium ("MIP").
There is no limit on the amount that can be insured.
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Use of Loan Proceeds: |
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Construction
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Modernization
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Remodeling
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Capital Equipment
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Expansion
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Refinancing |
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Refinancing of Existing Debt: |
A minimum of 20% of the proposed FHA insured mortgage loan must be utilized for facility renovation, rehabilitation or the purchase of new equipment. Of the 20%, half must be used for the purchase of equipment. The remainder may be used to refinance existing debt.
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Minimum Financial Requirements: |
Over the past three full fiscal years, an existing hospital should have an average Operating Margin equal to or greater than 0.00%, and Average Debt Service Coverage equal to or greater than 1.25x. However, in certain cases, these requirements may be modified or waived by HUD.
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Certificate of Need Requirement: |
New construction or substantial rehabilitation projects require a Certificate of Need, or a state commissioned independent financial feasibility report.
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Project Reserve: |
Will establish a reserve fund for replacements as part of the permanent loan that will build to a balance equal to two years of debt-service after 10-years.
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Secondary Financing: |
Surplus cash notes for proprietary mortgagors and residual receipts notes for nonprofit mortgagors are permitted, but with no foreclosure rights.
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Dept. of Health &
Human Services "HHS": |
Unlike the other HUD programs, HHS concurrently receives the application for loan insurance. It must review the financial feasibility and construction aspects of the proposed project, and upon completion transmits a letter of approval to HUD. HUD, at the end of its mortgage credit review and receipt of HHS's approval, issues its Firm Commitment to the Mortgagee for insurance.
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Processing Timeline: |
The process from initial review by DPMC to loan closing and first loan disbursement can be accomplished within nine to ten months for a Critical Access Hospital and eleven to twelve months for a Non-Critical Access Hospital.
n Pre-Assessment Stage: month one
n Pre-Application Stage: month two
n Application Stage: months three to seven
n Loan Closing Stage (CAH): months eight to nine
n Loan Closing Stage (non CAH): months eight to eleven |
