House Legislation Votes to Limit FHA’s Hospital Insurance Program

A bill passed by a House of Representatives committee this week would place limitations the Federal Housing Administration’s Section 242 Program, which currently insures hospital buildings throughout the U.S.

The 242 program is currently administered by the Office of Hospital Facilities within the Office of Healthcare Programs, allowing for insurance for acute care hospitals spanning large teaching institutions to small, rural critical access hospitals.

The Protecting American Taxpayers and Homeowners (PATH) Act, which passed through the House Financial Services Committee this week, initially aimed repeal the program two years from the time of the bill’s enactment. Amendments to the bill passed this week removed the full repeal, but maintained a requirement that HUD’s secretary must set standards for the mortgage insurance program  including a limit on the number of mortgages granted through the program to hospitals owned by a single entity or person.

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Additional the revisions would require the FHA to explore the impact of geographic concentration in the program.

The bill aims to restructure and reform the housing finance system in the U.S. including shifting insurance away from government sponsored enterprises including Fannie Mae and Freddie Mac, as well as Federal Housing Administration programs.

The bill has been met with opposition from housing and development industry participants, including the National Association of Home Builders and Mortgage Bankers Association.

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The American Hospital Association has spoken directly against the measure, via a letter from AHA executive vice president Rick Pollack to Congress.

“The Section 242 program has been the key to keeping vital hospital services available to many communities,” Pollack wrote. “State and local governments would otherwise be called upon to provide these necessary services. If that were the only alternative the resulting increased borrowing cost to state and local governments would be borne by taxpayers and ratepayers in every local jurisdiction.”

Written by Elizabeth Ecker