U.S. Department of Housing & Urban Development (HUD) announced plans to implement reductions in the upfront and annual mortgage insurance premiums (MIP) it charges under the Section 232 mortgage insurance program for qualifying residential care facilities that meet industry-recognized green building certifications. Upon implementation, MIP rates will be reduced to 0.25% for mortgages on properties that meet the new Section 232 Green MIP requirements. The current standard MIP rates are generally 1.00% upfront for year-1 and between 0.45% - 0.77% annually thereafter (see 232 MIP Rates and 232/223(f) MIP Rates).

The planned Section 232 Green MIP reduction follows the successful implementation of a similar Green MIP reduction under the HUD multifamily loan program. Under the multifamily program, to qualify for the Green MIP reduction, new construction multifamily projects most undergo a Statement of Energy Design Intent (SEDI), as part of application processing, which demonstrates that the building design meets an industry-recognized standard for green buildings, such as ENERGY STAR, National Green Building Standard, U.S. Green Building Council's LEED-H, and others. Once completed and stabilized, such properties must have their actual energy utility usage analyzed annually in a Statement of Energy Performance (SEP) that results in a passing score based on the selected green building standard. Existing projects that do not require additional repairs to qualify for the green building standard only need to undergo an SEP as part of application processing, and then again each year, thereafter. Similar requirements are anticipated under the Section 232 Green MIP program.

HUD insured loan programs offer long term, low interest rate financing for new construction and permanent financing for qualifying residential care facilities and apartment projects. The popular Section 232 and 232/223(f) residential care facility loan programs offer loan amounts up to 80%/90% (acquisition/new construction) LTC and 75%-85% LTV, as supported by a 1.45x DSCR.

Additional details regarding the Section 232 Green MIP reduction are available in the official FHA press release and Federal Register Notice. Give us a call for more information and to learn more about HUD loan programs. 

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