Webinar
Thursday, October 16, 2013
1:00 PM ET
Presented By:
Anthony Luzzi, President
Webinar Objectives:
• To introduce HUD’s major mortgage insurance programs for skilled nursing,
assisted living and elderly housing to AJAS members.
• To provide an overview of each program’s key eligibility requirements,
underwriting guidelines and fee structures
• To determine how AJAS members could benefit from these programs.
Sims Mortgage Funding at a Glance
•
Subsidiary of HJ Sims dedicated to providing FHA-insured loan financing for
healthcare, senior housing, multifamily and hospital projects.
•
We are active in all of FHA’s programs, from market-rate and affordable rental
housing to skilled nursing and assisted living to hospitals. We have closed loans for
new construction, expansions, renovations, acquisitions, and refinancings. We also
have provided consulting and financial advisory services to clients with FHA-insured
loans already in place that have enabled them to reposition existing projects
efficiently and cost-effectively.
What Are the General Features of HUD-Insured Loans?
• Fixed rates of interest determined based on current market conditions at time of
loan funding.
• Sole purpose borrowing entity; non-recourse loan.
• Long terms: typically 35 year maximum on acquisition/ refinancing loans and 40 year
maximum on new construction/ substantial rehabilitation loans.
• High loan-to-value (LTV) or loan-to-cost (LTC).
• Full amortization throughout entire term: no balloon payment.
• Loan is typically pre-payable at borrower’s option after as short as a 1 to 2 year
lockout period.
• Loan can be assumed by new owner upon the sale of a project pursuant to a Transfer
of Physical Assets (TPA) process.
Major Insurance Programs:
FHA SECTION 232/223(f) – Lean Processing
Loans to acquire or refinance Skilled Nursing, Assisted Living and Specialized Use Facilities.
PROGRAM FEATURES
All project types generally are underwritten at an 80% loan-to-value ratio (LTV) and a 1.45 X debt service
coverage (DSC).
Loan is pre-payable, assumable and non-recourse; maximum term is 35 years with full amortization.
Cost of repairs, improvements and an initial deposit to a reserve for replacement fund based on a fifteen
year projection are financeable; however, the cost of repairs and improvements may not exceed 15% of the
project’s value after repairs are completed or involve replacement of two or more major building
components. Projects whose costs exceed these levels may qualify under Section 232 as “substantial
rehabilitation” transactions.
Projects must be at least three years old prior to filing an application and must not have been substantially
rehabilitated within that period.
Project debt incurred within two years of the filing of an application must be analyzed to determine program
eligibility; project debt that is more than two years old does not require additional analysis.
FHA SECTION 232/223(f) – Lean Processing Cont.
FEES
0.30% Application Fee to FHA
1.00% Mortgage Insurance Premium Up Front at Closing $30 per
unit
Inspection Fee
2.00% Maximum Financing (Origination) Fee 1.50% Maximum Placement Fee
2.00% Costs of Issuance for Tax-Exempt Bond Transactions
An annual 0.65% Mortgage Insurance Premium (.45% for Tax Credit Transactions) is paid to FHA as part of the monthly mortgage payment requirements. Fees are required for market studies, environmental reports, appraisals, and project capital needs assessments (PCNA). The costs of these reports are financeable.
ESCROWS
Escrows required for property insurance, real estate taxes, and FHA mortgage insurance premium.
Replacement reserve escrow for on-going replacement of depreciable items is required for the term of the loan. The amount of the annual deposit will be revised after 10 years based on a capital needs assessment.
An escrow equal to 120% of the cost of repairs is required. Approximately 100% is funded from loan proceeds; the Borrower funds the remaining 20%, which is released upon completion of repairs.
FHA SECTION 223(f)/202 – Multifamily Accelerated Processing (MAP)
Loans to recapitalize Section 202 Elderly Housing Projects
PROGRAM FEATURES
Provides Section 202 projects with capital for repairs, renovations and enhanced programs.
Maximum loan to value (LTV) is 90%; maximum term is 35 years with full amortization.
Loan is pre-payable, assumable and non-recourse.
Requires a 1.11 X debt service coverage based on a maximum of 95% occupancy.
Underwriting based on Section 8 Housing Assistance Payment (HAP) Contract rents even if higher than market rents. HUD will extend HAP Contract for 20 years.
The cost of repairs and initial deposit to a reserve fund for building/equipment replacement can be included in the financing.
The cost of rehabilitation must not exceed the greater of a) 15% of the project’s replacement cost or b) $6,500 per unit adjusted by a high cost percentage based on geographic location; or, c) involve the replacement of at least 2 major building components. Projects whose costs exceed these limits may qualify under the Section 221(d)(4) substantial rehabilitation program.
FHA SECTION 223(f)/202 – Multifamily Accelerated Processing (MAP) Cont.
FEES
0.30% Application Fee to FHA
1.00% Mortgage Insurance Premium Up Front at Closing
Inspection Fee - $30 per unit when repairs exceed $100,000 but are less than $3,000 per unit; the greater of $30 per unit or 1% of the cost of repairs when the repairs are greater than $3,000 per unit; or, $1,500 when the repairs are less than $100,000
2.00% Maximum Financing (Origination) Fee 1.50% Maximum Placement Fee
2.00% Costs of Issuance for Tax-Exempt Bond Transactions
An annual 0.45% Mortgage Insurance Premium is paid to FHA as part of the monthly mortgage payment requirements. Additional fees will be required for third party appraisals, environmental reports and project capital needs assessments (PCNA). The costs of these reports can be paid from existing reserve for replacement funds subject to HUD approval.
ESCROWS
Escrows required for property insurance, real estate taxes, and FHA mortgage insurance premium.
Replacement reserve escrow for on-going replacement of depreciable items is required for the term of the loan. Projects must obtain a new PCNA every 10 years, with the reserve for replacement deposit adjusted based on the results of the PCNA.
FHA SECTION 232 - Lean Processing
Loans to construct or substantially rehabilitate Skilled Nursing, Assisted Living and Specialized Use
Facilities
PROGRAM FEATURES
Combines construction and permanent financing into a single transaction approved at the same time.
Skilled nursing facilities generally are underwritten at an 80% loan-to-value ratio (LTV) and a 1.45 X
debt service coverage (DSC); assisted living transactions generally use a 75% LTV and 1.45 X DSC.
Loan is pre-payable, assumable, and non-recourse; maximum term is 40 years with full amortization.
Projects must comply with the State’s eligibility requirements for licensure and operating standards.
Construction and rehabilitation costs are subject to Davis-Bacon Prevailing Wage Requirements.
FEES
0.30% Application Fee to FHA
0.77% Mortgage Insurance Premium (.45% for low income housing tax-credit deals)
0.50% Inspection Fee
2.00% Maximum Financing (Origination) Fee 1.50% Maximum Placement Fee
2.00% Costs of Issuance for Tax-Exempt Bond Transactions
FHA SECTION 232 - Lean Processing Cont.
An annual 0.77% Mortgage Insurance Premium (.45% for Tax Credit Transactions) is paid to FHA as part of the monthly mortgage payment requirements. Additional fees are required for third party market studies, environmental reports, appraisals, architectural reviews and cost reports. The costs of these reports are financeable.
ESCROWS
Escrows required for property insurance, real estate taxes, and FHA mortgage insurance premium.
Replacement reserve escrow for on-going replacement of depreciable items is required for the term of the loan. The amount of the annual deposit will be revised after 10 years based on a project capital needs assessment (PCNA).
An operating deficit escrow and in some cases a debt service reserve escrow will be required by FHA. This escrow must be funded by the borrower at closing with cash or a letter of credit.
