FHA Direct Lender. HUD Section 242 Mortgage Insurance Program

Transcription

1 FHA Direct Lender HUD Section 242 Mortgage Insurance Program

2 HUD SECTION 242 MORTGAGE INSURANCE PROGRAM CBRE is an FHA MAP approved direct lender providing competitive financing for hospitals. CBRE can help you access affordable financing for your hospital s capital project under HUD s Section 242 mortgage insurance program. Hospital Eligibility: Acute Care Hospitals Critical Access Hospitals Large Urban Teaching Hospitals Hospitals in Systems For-Profit, Not-for-Profit, and Government-Owned Hospitals FHA Loan Possibilities: Construction or remodeling Seismic upgrades Expansion Modernization Equipment Refinancing Streamlined Application Process: Fast-Track Processing Available Reduced Documentation Requirements Attractive Loan Terms: No minimum or maximum loan amount Loan-to-Value up To 90% 25 year fully amortizing loan, plus construction period Debt service coverage of 1.25x Non-recourse loans No cash required at closing with sufficient equity Flexible Funding Options: Taxable Bonds or Tax-Exempt Bonds Ginnie Mae Securities Other FHA Advantages: Design-Build form of contracting allowed for projects under $30 Million Flexible Loan Covenants possible Timing: Entire process, pre-assessment through closing, can be completed in five to six months Varies depending on project size and process organization Page 2, CB Richard Ellis, Inc.

3 FINANCING AMERICA S HOSPITALS The Federal Housing Administration (FHA) helps hospitals access affordable financing for capital projects. Since the program began in 1968, FHA has insured over 358 hospital mortgages for a total in excess of $13.5 billion. Clients range from small rural facilities to some of the nation s top urban teaching hospitals. FHA insurance enables clients to enhance their creditworthiness because their debt is backed by the United States Government. In fact, FHA-insured hospitals usually obtain the lowest interest rates available to their segment of the market. Uses for FHA-Insured Hospital Loans Construction Financing Seismic Upgrades Refinancing Modernization Remodeling Equipment Expansion FHA mortgage insurance can be used for to be built or existing hospitals. Coverage, Cost and Conditions No minimum or maximum loan amount Loan-to-Value up To 90% 25 year fully amortizing loan, plus construction period Debt service coverage of 1.25x Non-recourse loans No cash required at closing with sufficient equity FHA insures 99% of loan amount No pre-application fee for review to determine proposal acceptability FHA fees total 0.8% of loan amount and reimbursable from loan proceeds Fixed annual mortgage insurance premium is 0.5% of unpaid principal balance Financing fee negotiated between borrower and CBRE A minimum of 20% of the approved mortgage amount must be used for new construction rehabilitation or modernization. Up to 80% of the approved mortgage amount can be used for refinancing existing capital debt. Monthly payments will be required for a Mortgage Reserve Fund that will build to a balance equal to two years of debt service after ten years. You must grant the FHA-insured lender a first mortgage on the entire hospital, including property, plant, equipment, and receivables. Exceptions may include leased equipment, off-site property, capital associated with affiliations, etc. Prevailing wages pursuant to Davis-Bacon wage act required Page 3, CB Richard Ellis, Inc.

4 Mortgage Lender CBRE is fully approved as an FHA direct healthcare lender. Minimum Eligibility Requirements The following hospitals are eligible applicants: Acute Care Hospitals Critical Access Hospitals Large Urban Teaching Hospitals Hospitals in Systems For-Profit, Not-for-Profit, and Government-Owned Hospitals An acute care hospital cannot have more than 50% of patient days attributable to the following services: chronic convalescence and rest drug and alcoholic epileptic nervous and mental mental deficiency tuberculosis (For Critical Access Hospitals (CAHs) this restriction does not apply.) How to Get Started A feasibility study or compilation feasibility study is required. The following questions will aid you in completing a self-assessment to determine whether your hospital would be eligible: FHA s hospital program is for licensed acute care facilities. Is the facility a licensed acute care hospital? Are at least 50 percent of the facility s patient days for acute care services? Critical access hospitals are exempt from the patient day requirement. Does your State have a Certificate of Need (CON) process? Hospitals in CON states need to obtain the necessary CONs to be eligible for this Program. FHA has a 90 percent maximum loan-to-value requirement. After the project construction is completed, will the mortgage exceed 90% of the estimated book value of all property, plant, and equipment that secures the mortgage? If the Loan-To-Value exceeds 90 percent, does the hospital have sufficient capital to make an equity contribution? If the planned hospital is a start-up, will it have sufficient working capital to cover start-up costs? Is the facility willing and able to grant an FHA-insured lender a first lien on the property, plant, and equipment that secures the mortgage (including patient receivables)? Do local government restrictions prevent the hospital from granting a first lien to FHA? Page 4, CB Richard Ellis, Inc.

5 FHA requires insured hospitals to make contributions to a Mortgage Reserve Fund (MRF). The MRF is a rainy day fund that, at FHA s discretion, may assist the hospital with mortgage payments if the need arises. Is the hospital willing to make monthly payments that will build to a balance equal to two years of debt service after 10 years? Over the last three full Fiscal Years, has the hospital s average operating margin been equal to or greater than 0 percent, and the average debt service coverage ratio been equal to or greater than 1.25x? FHA mortgage insurance is for hospitals with a history of positive operating performance. Recently designated Critical Access Hospitals may use their cost-based rates to re-create these ratios Is the hospital planning to refinance debt as part of the project? FHA will allow the refinancing of capital debt with mortgage proceeds if the work was completed more than two years before the Mortgagee files a Section 242 application with FHA. Also, if debt is refinanced, the construction component of the mortgage must be at least 20 percent of the total proposed mortgage amount. FHA cannot insure a project already under construction. If your project is already under construction, FHA mortgage insurance is not right for you. Are you planning a Design/Build project? FHA only considers Design/Build projects with mortgage amounts under $30 million. Does the hospital and project fulfill a community need? FHA s hospital mortgage insurance program was created to assist hospitals and projects that are urgently needed by the community in which they are located. FHA carefully reviews facilities that are physician-owned. If physician ownership is present, the hospital must comply with the Stark amendments and anti-kickback prohibitions. In addition, investor-owned hospitals are reviewed for their impact on existing healthcare providers, particularly those providing uncompensated care. If your hospital meets the minimum eligibility requirements described above, we invite you to discuss your plans with us. Based on its analysis of eligibility, risk, and market need, FHA may schedule a pre-application meeting with you and your project team. If the project initially appears to be financially sound, FHA will invite you to submit a full application. Page 5, CB Richard Ellis, Inc.