ELIGIBLE PROPERTIES:
Proposed new construction or substantial rehabilitation (including both
purchase and refinancing) of skilled nursing, assisted living and other
specialty residential care facilities.
Assisted living facilities must provide room, board, and continuous
protective oversight. No “founder fees”, life care fees or other up-front
fees are allowed.
In order to qualify as a substantial rehabilitation project, either (1) the
cost of repairs, replacements or improvements must exceed 15% of
the property’s value after completion, or (2) two or more major building
systems must be replaced.
MAXIMUM LOAN:
New Construction:
1. 90%* of the FHA estimated replacement cost; or
2. Depending on the rental mix, the following DSCR and LTV ratios:
| |
Statutory |
FHA Benchmark |
| |
DSCR |
LTV* |
DSCR |
LTV* |
| Skilled Nursing |
1.11 |
90% |
1.45 |
80% |
| Assisted Living |
1.11 |
90% |
1.45 |
75% |
| Independent Living |
1.11 |
90% |
1.45 |
80% |
Substantial Rehabilitation Projects:
The lesser of the two criteria above; or
Refinance:
3. 100% of the estimated rehabilitation cost plus the lesser of:
a. existing secured indebtedness; or
b. 90%* of the “as is” value before rehabilitation; or
Purchase:
4. 90%* of the estimated rehabilitation cost plus the lesser of:
a. 90%* of the actual purchase price of the property; or
b. 90%* of the “as is” value before rehabilitation.
*LTVs and LTCs for nonprofits are 5% higher than shown above.
INTEREST RATES:
Fixed rate determined by market rates at the time of rate lock.
AMORTIZATION:
Construction loan which converts into a 40-year, fully amortizing loan.
PERSONAL RECOURSE:
Non-recourse.
ASSUMABILITY:
Assumable, subject to CWCapital approval.
SUBORDINATE FINANCING:
Generally not permitted, special requirements apply.
PREPAYMENT:
Negotiable.
WAGE REQUIREMENTS:
Adherence to Davis-Bacon prevailing wage laws is required.
PROFESSIONAL LIABILITY INSURANCE:
Required in all cases. Minimum amount: $1M per occurrence / $3M aggregate. Additional requirements apply.
ANNUAL MORTGAGE INSURANCE PREMIUM:
During the construction period, the MIP is paid annually in advance, based on a rate established by FHA. The rate is fixed at initial endorsement. After commencement of amortization, the MIP is escrowed monthly based on the average principal balance.
ESCROWS:
Monthly escrows for real estate taxes, property insurance, reserves for replacement, sinking fund (if applicable), and mortgage insurance premiums.
COMMERCIAL SPACE:
Up to 10% of the gross floor area of the project. Commercial activity must be compatible with the use of the facility. Day care space is not considered commercial.
ENVIRONMENTAL ISSUES:
Special rules apply for properties which are located in Flood Hazard Zones as designated by FEMA.
APPLICATION FEE:
A non-refundable fee of 0.3% of the requested mortgage amount is payable to FHA at the time of application.
INSPECTION FEE:
0.5% of the mortgage amount (or cost of improvements for sub-rehabilitation projects) is payable to FHA at Initial Endorsement.
FINANCING AND PLACEMENT FEES:
Negotiable.
LIHTC:
Program can be used in conjunction with Low Income Housing Tax Credits.
BOND ENHANCEMENT:
Program can be used to provide a AAA rating of tax exempt bonds.
CLOSING EXPENSES:
Standard transaction costs, including legal fees, title insurance and survey.
OTHER FHA REQUIREMENTS:
Cash escrows or letters of credit are required for the following:
- Forecasted operating deficits, to be released 3 consecutive months of minimum 1.45 DSCR, as determined by FHA.
- 2% of the mortgage amount for working capital, to be released 12 months after project completion if loan is not in default.
- Purchase of any minor non-realty items.
- 100% performance and 100% payment bond or a letter of credit equal to 15% or 25% (depending on structure type) of the construction contract.
- If not covered by performance and payment bond, 2.5% of the construction contract amount as latent defects guarantee.
- 100% of off-site construction costs.
STATE LICENSURE:
A Certificate of Need and/or an operating license must be submitted if required by state or local law. An assisted living or board and care facility must be regulated by the state or political subdivision in which the facility is located.
FHA PROCESSING TIME:
One or two stages for FHA LEAN Processing Procedures:
- Initial Firm Application Stage: 30 days for review.
- Final Firm Commitment Stage: 15 days for review.
- One stage combining items 1 and 2 above: 30 days.
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This is a summary of general program terms, which are subject to change. This is not a commitment to lend.