HUD Updates Senior Care Facility Loan Program Due to Growing Demand

After updating its multifamily rental project closing documents, the Department of Housing and Urban Development (HUD) moved on to the next task at hand: revising its healthcare facility documents “to utilize, as appropriate, the updated multifamily documents while also developing standardized healthcare facility-specific documents as necessary.” 

The updates have been a long time in coming, as 1996 marks the last time HUD amended Section 232 regulations. “Given the far greater demand today for nursing homes, and long-term care and assisted living facilities, and the changes, over the years, in how these facilities offer services to an aging population,… HUD’s Section 232 regulations need to be revised and updated,” the agency said.

A new definition of eligible borrower is provided, including that borrowers must be a single-asset borrower entity acceptable to the Federal Housing Commissioner and must possess the necessary power to operate the project, although the Commissioner may choose to make exceptions to this requirement in limited circumstances an according to certain criteria. 


The rule also updates the definition of a mortgage property to “include all of the borrower’s interest in any property, real, personal, or mixed, covered by the mortgage or mortgages securing the note endorsed for insurance or held by the Secretary.”

It also requires borrowers to establish a long-term debt service reserve account at closing, which must be maintained throughout the mortgage loan’s term, in consideration of the “complexities… and volatility of both funding… and market demand for residential care facilities” to improve risk management.

Other updates encompass contract rights and obligations, financial reporting standards, and reducing duplicative inspections for senior care facilities. 


HUD is asking for comment on the revised healthcare facility documents for its Section 232 loan program. The revised documents can be viewed in a format that tracks the changes and updates made to the previous version. A full summary of the updates has been published in the Federal Register. 

Written by Alyssa Gerace