HUD's four hospital loan programs
FHA insures hospital loans under four sections of the National Housing Act. Section 242 builds and renovates, 223(f) refinances or buys, 223(a)(7) refinances a loan FHA already insures, and 241(a) adds a second loan for improvements. All are fixed-rate and fully amortizing. Terms run up to 25 years from the start of amortization, except 223(a)(7), which allows the remaining term plus 12 years.
| 242 | 223(f) | 223(a)(7) | 241(a) | |
|---|---|---|---|---|
| Finances | New construction, expansion, renovation; can also refinance existing debt | Refinancing capital debt or buying an existing hospital | Refinancing an existing FHA hospital loan | Improvements on a hospital with an FHA 242 or 223(f) loan |
| Construction share | Hard costs at least 20% of the mortgage | Hard costs under 20% | Required improvements only | The improvements |
| Loan limit | 90% of HUD's estimate of replacement cost, including equipment | 90% tests on refinanced debt or acquisition cost | Lesser of original principal or balance plus costs; debt service can't rise | Supplemental plus existing balance at most 90% of replacement cost after the work |
| Term | Up to 25 years from start of amortization | Up to 25 years | Up to remaining term plus 12 years | Up to 25 years |
| Annual MIP | 0.70% | 0.65% | 0.55% | 0.65% |
| Upfront MIP | 0.70% | 1.00% | 0.50% | 0.65% |
| Active loans now | 22 | 17 | 11 | 26 |
Sources: 24 CFR Part 242 (sections 242.7, 242.15, 242.27, 242.89 and 242.91); premiums from HUD's notice of May 19, 2022 (87 FR 30510) as corrected August 12, 2022 (87 FR 49877). HUD's 2025 premium cut to 0.25% covered multifamily housing programs, not hospitals. Active loan counts from HUD's file of 2026-09-30.
What else every loan carries
- A first lien on the real estate, other capital assets and accounts receivable.
- A mortgage reserve fund that builds to one year of debt service by year five and two years by year ten (24 CFR 242.14).
- Prepayment: up to 15% of the original principal a year without charge, though loans funded through bonds or Ginnie Mae securities can carry lockouts (24 CFR 242.37).
- Davis-Bacon wages on 242 and 241 construction; not on 223(f) or 223(a)(7) refinancing (24 CFR 242.55).
Fees
HUD's application and commitment fees total $3 per $1,000 of the mortgage, 0.30% (24 CFR 242.17). The inspection fee on construction runs up to $5 per $1,000; on refinancing and acquisition it is 10 to 50 basis points depending on the share of hard costs (24 CFR 242.18). Lender charges are capped at 2% for the initial service charge and 3.5% in total, or 5.5% in total when the loan is funded with bonds (24 CFR 242.22).
How the loans are funded
HUD describes the loans as funded through Ginnie Mae securities or tax-exempt bonds, with FHA insuring 99% of the loan amount and no maximum loan size. Of the 76 active hospital loans, 12 are flagged as tax-exempt bond financed in HUD's file.
Refinancing existing debt
Debt refinanced under 242 or 223(f) has to be capital debt: originated and continuously held by the borrower and used only for capital purposes, documented with audited statements and offering documents (Mortgagee Letter 2023-12, June 20, 2023).
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