HUD Section 242: Hospital Mortgage Insurance Program

U.S. Department of Housing and Urban Development
Office of Healthcare Programs
451 7th Street, SW
Washington, DC 20410

Office of the Deputy Assistant Secretary - Room 6264
Office of Hospital Facilities
Office of Residential Care Facilities

Office of Hospital Facilities
Hospitals@hud.gov
Office of Residential Care Facilities
LeanThinking@hud.gov
Office of Architecture and Engineering
OAEQuestions@hud.gov

Section 242 of the National Housing Act provides mortgage insurance for acute care hospital facilities ranging from large teaching institutions to small, rural Critical Access Hospitals.

The Federal Housing Administration (FHA) helps hospitals access affordable financing for capital projects. Uses may include remodeling, expansion, modernization, equipment, refinancing, and acquisition.

Eligible hospitals include for-profit, nonprofit, and municipally owned hospitals licensed and regulated by their state or a political subdivision of their state. Eligible hospitals must have more than 50% of a hospital's adjusted patient days in acute care categories; the ability to grant first lien on real estate, other capital assets, and accounts receivable; a 3-year aggregate operating margin of 0% or better; and a 3-year historical debt coverage at 1.25x or better.

Loan terms include:

• No maximum loan amount
• Loan-to-value up to 90%
• No cash required at closing with sufficient equity
• FHA insures 99% of loan amount

Flexible funding options include:

• Taxable bonds
• Tax-exempt bonds
• Ginnie Mae securities
• Whole loan placements

Visit the How to Get Started section of the page to review the 10 step process for submitting and completing a HUD Section 242 project.