HUD Revamps Fire Safety Loan Program, Warns Senior Care Providers: Don’t Get Burned

With the popularity of the Department of Housing and Urban Development’s LEAN lending process among lenders and borrowers alike, HUD is hoping similar thinking applied to its Fire Safety Equipment Loan Program (FSELP) will launch it into wider usage, especially with a related CMS deadline for fire safety requirements coming up.

In the 38 years FSELP has been around, there hasn’t been much—if any—demand for this loan, a search of the program’s records revealed.

This could be because of regulatory provisions set forth in 1974 that haven’t been revised since, and HUD believes that by changing some of those provisions, the program will be more attractive to both lenders and project owners.


“It’s a more streamlined process for lenders to come through HUD to process these applications,” says Roger Lukoff, Associate Deputy Assistant Secretary at the Federal Housing Administration’s Office of Healthcare Programs. He said his office has been getting “numerous inquiries” from facilities about obtaining a loan through this program.

Slow Start, but Gaining Steam

Another reason the program didn’t get a lot of attention before stems from the expectation that the Centers for Medicare & Medicaid Services (CMS) wouldn’t necessarily put through regulation for fire safety requirements in long-term care facilities that it announced in August 2008, according to Lukoff.


The regulation requires skilled nursing providers to be equipped with a supervised automatic sprinkler system by August 13, 2013—a deadline that’s fast approaching and looking “pretty firm,” says Lukoff, who added that there’s a clear understanding within Medicare-certified facilities that they need to be in compliance as a fully-sprinklered facility by that date.

“Here at HUD, we’re definitely interested in supporting fire safety,” he told SHN. “With this fire safety equipment loan program, we’re confident we’ll have a role in literally saving people’s lives in long-term care facilities.”

The program allows owners of nursing homes, assisted living facilities, intermediate care facilities, and board and care projects to purchase and install fire safety systems in keeping with regulation from the Centers for Medicare and Medicaid Services.

Recommended SHN+ Exclusives

The idea behind revamping the program is similar to HUD’s recent (and successful) efforts to streamline other, more popular programs.

“Our HUD staff in the 232 program and the entire Office of Healthcare Programs fully embrace the LEAN process for the purpose of making it easier for our stakeholders to participate in the program if they qualify,” says Lukoff.

General Program Requirements

There are a number of requirements for those wishing to participate in the loan program:

  • Eligibility, whether or not facilities are already insured by FHA—Nursing homes, intermediate care facilities, board and care, and assisted living facilities;
  • Maximum loan amounts—The lesser of fire safety improvements plus eligible fees or debt service coverage;
  • Criteria for improvements—Fire safety equipment must be installed, and facilities need to demonstrate it will be in compliance with CMS and state requirements;
  • Loan Security—The loan must occupy a first or second lien position;
  • No appraisal requirements for both FHA-insured and non-FHA-insured projects;
  • Non-FHA-insured projects must undergo a project capital needs assessment (PCNA), but FHA-insured projects are exempt;
  • Mortgage Insurance Premium—1% of mortgage amount
  • Contract—Standard FHA contract
  • Insurance—Commitments will be issued on an “Insurance upon Completion” basis—construction financing won’t be insured;
  • Mortgage term—For mortgage amounts of $100,000 or greater for FHA-insured projects, the term will be the lesser of: coterminous with maturity of existing FHA mortgage, or 15 years; for non-FHA-insured projects the mortgage term is 15 years. For loans under $100,000, the term will be the lesser of: coterminous with maturity of existing FHA mortgage, or 10 years, for FHA-insured projects, while non-FHA-insured projects will have a ten-year term.

“We are poised right now to receive these applications,” says Lukoff, who says he’s concerned for the facilities who have not yet completed this requirement. “This will not happen overnight. They have until August 2013, and there are only a limited number of companies out there who do these types of fire sprinklers. We strongly encourage the industry to get into compliance.”

More information can be found here.

Written by Alyssa Gerace