HUD's Office of Hospital Facilities administers the FHA Section 242 Mortgage Insurance Program, which provides FHA mortgage insurance to approved hospitals for low interest capital project loans, acquisitions and debt refinancings. Eligible projects include: hospital expansion, remodeling, and replacement, as well as equipment purchases, medical office buildings and clinics. HUD/FHA 242 borrowers range from rural critical access hospitals to urban teaching facilities and national health systems.
As a HUD-licensed FHA mortgage bank, InnoVative Capital originates FHA 242 mortgage insured loans for nonprofit, government-owned, and for-profit hospitals. InnoVative Capital's proprietary FHA 242 hospital analytics have been at the forefront of substantive changes in the FHA 242 Program.
Advantages of FHA 242:
- No maximum loan amount
- 25-year amortization
- Fixed interest rates
- Construction and permanent financing
- HUD loan to value of 90%
- Loans fund up to 100% of project costs
- Cashless loan closings are possible
- U.S. government credit enhances FHA 242 insured mortgage loans
- With FHA 242, nonrated hospitals can access low interest long-term loans
- Low interest rates improve financial feasibility and debt capacity
- No hospital credit rating requirement for applicants
- Industry-friendly financial covenants
- FHA 242 is not subject to federal or state funding caps
- Centralized program management in Washington, D.C.
- Consistent underwriting standards
InnoVative Capital's HUD/FHA 242 Mortgage Banking Services
FHA 242 Pre-Application
InnoVative Capital evaluates each client's financial position to determine debt capacity, optimize project budgets, calculate required capital contributions, and structure necessary liquidity reserves. We outline supplemental revenue sources that may be available through tax support, government grants, corporate partnerships, physician recruitment and service-line modifications. InnoVative Capital's in-house analytics are incorporated into client reports, FHA submissions, and public presentations.
FHA 242 Application and HUD Underwriting
As FHA mortgage banker, InnoVative Capital receives HUD's invitation to produce and submit its proprietary FHA 242 mortgage insurance application. During this process, we oversee the development of all financial and project-related, third-party reports. Additionally, InnoVative Capital negotiates HUD terms and conditions and accelerates the delivery of an FHA 242 mortgage insurance commitment.
Issuance of HUD Commitment, Financing and Closing the Loan
Upon our receipt of the FHA 242 mortgage insurance commitment, we evaluate the pros and cons of municipal bonds and Ginnie Mae mortgage securities, as well as assess comparative interest rates. Once the funding vehicle is selected, InnoVative Capital works to execute the loan closing, and thereafter, we can provide cost-certification, loan monitoring and covenant compliance services.
- Closed the first critical access FHA 242 hospital loan
- Closed the first "Necessary-Provider" FHA 242 critical access hospital loan
- Closed the last AAA-rated tax-exempt FHA 242 mortgage insured revenue bond issue for a replacement facility project
- Led successful initiatives to obtain tax support for three (3) critical access hospitals for their 25-year loans
- Assisted in obtaining critical access hospital status for a community hospital
- Negotiated specialized upfront liquidity and equity requirements in HUD commitment for financial turnaround hospital
- Assisted in restructuring of service lines to improve financial feasibility and obtain HUD approval
- Restructured FHA 242 Ginnie Mae Collateralized loan to produce $5 million savings
- Refinanced outstanding FHA 242 and advance refunded mortgage revenue bonds to generate $8 million savings
- Separated FHA 242 financing into two loans for refinancing and construction to reduce overall loan rate by 75 basis points.
- Eliminated required hospital cash contribution with inclusion of unrelated off-campus properties
- Bifurcated hospital real estate to exclude certain properties from HUD mortgage
- Developed hybrid financial ratio analysis to incorporate tax support
- Received HUD approval & closed loan for start-up for-profit hospital for a previously denied applicant
- Received Georgia allocation of 45% subsidized, Recovery Zone Economic Development Bonds to lower net FHA 242 loan rate to 3.63%
Products
- All-In-One Construction and Permanent Financing
- FHA 242 Ginnie Mae Collateralized Mortgage Loans
- FHA 242 Ginnie Mae Collateralized Taxable Bonds
- FHA 242 Mortgage Insured Tax-Exempt Bonds
- FHA Section 241 Mortgage Insured Secondary Loans (Pursuant to FHA 242)
- FHA 242/223f Mortgage Insured Debt Refinancing Loans (Pursuant to FHA 242)
- FHA 223 a-7 Refinancing of Outstanding FHA 242 Loans (Pursuant to FHA 242)