|HUD No. 22-152
HUD Public Affairs
August 18, 2022
FEDERAL HOUSING ADMINISTRATION IMPLEMENTS RESIDENTIAL CARE “GREEN MORTGAGE INSURANCE PREMIUM”
Guidance issued today explains how lenders participating in the FHA’s Residential Care Facility Mortgage Insurance Section 232 program can obtain mortgage insurance premium reductions on mortgages for eligible “green” facilities.
Federal Housing Commissioner: Green MIP Award Will “Support Biden-Harris Administration’s Climate Goals and HUD’s Climate Action Plan”
WASHINGTON – The Federal Housing Administration (FHA) announced today that it has issued enforcement guidance for lenders to obtain a reduction in initial and annual mortgage insurance premiums (MIP) on most Section 232 Residential Care Facility mortgages for properties of entities that complement the green known by the industry. building certificates and this will achieve significant and measurable improvements in energy and water efficiency. Announced on May 19, 2022 and August 12, 2022, Federal Register announcements, the Green MIP reductions lower both pre-capitalized MIP and annual MIP rates by 25 basis points. The new rates go into effect for mortgages on facilities eligible for FHA mortgage insurance firm commitments issued or reissued on or after October 1, 2022.
“We want to ensure that the imperative to address climate change is aligned with the need to ensure the availability of residential care in communities.” said Federal Housing Commissioner Julia Gordon. “The MIP Green Award will provide financial incentives to increase the energy and water efficiency of these facilities, which will not only support the climate goals of the Biden-Harris Administration and HUD’s Climate Action Plan , but will also ultimately reduce operating costs for these facilities.”
This reduction is designed to encourage owners of nursing homes, assisted living facilities, boarding and care homes, and intermediate care facilities to adopt standards for the construction, rehabilitation, repairs, maintenance, and operations of the property that are more efficient and durable than are usual for these facilities.
About Section 232 “Green MIP” Reductions
For mortgages on properties that meet the “Green MIP” requirements included in today’s Mortgage Letter, the application:
- Reduces pre-capitalized annual MIP rates from the existing 45-100 basis points to 25 basis points for Section 2 32 New Construction/Substantial Rehabilitation, 223(f) Acquisition or Refinancing, 223(a)(7) Refinancing, and 241 (a) Programs of repairs, additions and improvements.
- It reduces annual MIP rates, which are generally between 45 and 77 basis points, to 25 basis points.
- Generates an estimated savings to a borrower of $93,000 in upfront mortgage insurance premiums in an average FHA Section 232/223(f) transaction for a $12.5 million secured loan and tens of thousands of dollars in annual mortgage insurance premiums .
- Applies to new and substantially rehabilitated Section 232 mortgage insurance applications for which the property owner demonstrates in its FHA application that the property will achieve a specified industry-recognized standard for green building certification and will achieve significant, measurable improvements in energy and water efficiency.
- Allows reduced MIP fees on refinancing transactions for properties that have already achieved a specified green building standard certification as long as the proceeds are used to complete further efficiency improvements and achieve the green building certification standards next level, where they apply.
About the FHA Section 232 Residential Care Facility Mortgage Insurance Program
FHA’s Office of Health Care Programs administers the Section 232 Residential Care Facility Mortgage Insurance Program, which provides loans to finance the construction, substantial rehabilitation, purchase or refinancing of qualified nursing homes, assisted living facilities assisted living and board and care homes. As of June 2022, FHA had active insurance on more than 3,700 residential care mortgages nationwide with a total outstanding principal balance of $32.2 billion.