HUD Updates Rule on New Construction Starts Prior to Commitments

The Department of Housing and Urban Development (HUD) recently revised a January 6, 2012 provision that had ended the authorization of construction starts prior to a loan commitment for new construction, substantial rehabilitation, and 241(a) projects, which insure mortgage loans to finance repairs, additions, and improvements to healthcare facilities with FHA-insured first mortgages or HUD-held mortgages.

“Having further considered the matter with respect to 241(a) projects, having gained further industry input, and having considered the risk and benefits of 241(a) loans, the Office of Residential Care Facilities has determined that, with respect to 241(a) loans only, we will continue to entertain requests for construction starts prior to commitment,” said HUD in its latest Lean 232 email blast, dated April 30, 2012.

In the email, HUD also restated its right to adjust the Other Program Queue (containing all Section 232 New Construction, Substantial Rehabilitation, 241(a), and 232 Blended Rate applications) to give preference to projects that include Low Income Housing Tax Credits “in order to meet project-specific placed-in-service deadlines.” 


These adjustments are not automatic, HUD clarifies, adding that they’ll be made on a case-by-case basis “appropriate to the subsidy on the project.”

Written by Alyssa Gerace