Update - " HUD Proposes Tighter Standards of Eligibility for 242 Hospital Mortgage Insurance Program
8/14/2009
As noted in the Waller Lansden bulletin circulated on July 10, 2009, the U.S Department of Housing and Urban Development (HUD), expanded the 242 Hospital Mortgage Insurance Program to permit eligible hospitals to use 100 percent of loan proceeds from the HUD 242 Program to refinance existing debt.
HUD is now in the process of publishing official amendments implementing these changes. Under the new rules, HUD proposes tighter eligibility standards for hospitals seeking to refinance debt in conjunction with the 242 Program. To be eligible for the new refinancing option, a hospital must have experienced an increase in its interest rate under its existing credit facilities of at least one hundred basis points since Jan. 1, 2008, or must demonstrate that an increase is imminent. In addition, a hospital must have maintained an aggregate operating margin greater than 0.33 percent and an average debt service coverage ratio of at least 1.80 for the last three fiscal years.
Hospital groups, including the American Hospital Association, have criticized the tight standards claiming they would “limit program access to otherwise creditworthy facilities” and “exclude hospitals critically in need of relief.” A link to new rules, which will be subject to public comment, is available at this link.
The opinions expressed in this bulletin are intended for general guidance only. They are not intended as recommendations for specific situations. As always, readers should consult a qualified attorney for specific legal guidance.
RSS feed: RSS is a web feed format used to publish frequently-updated content. Use this feed in an RSS reader or browser (Safari 2, Firefox 2, or Internet Explorer 7 and higher)
ICS file: Use this feature to download an ICS file to use to import the calendar's event(s) into another program, such as Outlook, iCal, or Google Calendar.
ICS Feed: This is a live feed in the iCalendar format. To use this feed, you will need a program capable of subscrbing to a life iCalendar feed. Some examples include Apple iCal, Microsoft Outlook 2007 or higher, or Windows Calendar in Vista.
