|HUD No. 22-098
HUD Public Affairs
May 18, 2022
FEDERAL HOUSING ADMINISTRATION ANNOUNCES NEW GREEN MORTGAGE INSURANCE PREMIUM REDUCTIONS FOR HOME SERVICES MEETING INDUSTRY RECOGNIZED GREEN BUILDING CERTIFICATES
The Section 232 reduction in mortgage insurance premiums for “green” housing service providers supports the Administration’s environmental goals and HUD’s Climate Action Plan.
WASHINGTON – The Federal Housing Administration (FHA) announced Wednesday, May 18 that it intends to implement significant reductions in the upfront and annual mortgage insurance premiums (MIP) it charges for most categories of mortgage insurance under the Section 232 Home Care Mortgage Insurance Program facilities where the facilities meet industry-recognized green building certifications and achieve significant, measurable improvements in energy and water efficiency. Supporting the environmental goals of the Biden-Harris administration and HUD’s Climate Action Plan, this reduction is designed to encourage owners of qualified nursing homes, assisted living facilities, and boarding and care homes to adopt higher standards for construction, rehabilitation, repairs, maintenance and ownership operations that are more energy efficient and sustainable than traditional approaches to such activities.
“Part of HUD’s mission is to create and support sustainable communities. This action today brings together two forms of sustainability: long-term care and energy efficiency.” said Deputy Secretary Adrian Todman. “With today’s action, we are reducing the cost of achieving modern, energy-efficient facilities that will combat climate change while increasing the safety and well-being of Americans requiring ongoing care.”
As published today in the Federal Register, the FHA’s new “Section 232 Green MIP” will reduce capitalized upfront MIPs by 75 basis points, from the existing 100 basis points to a new 25 basis points, for most categories of Section 232 mortgage insurance for real estate mortgages which meet the requirements of Section 232 Green MIP. In addition, FHA will reduce annual MIP rates, which are typically between 45 and 77 basis points, to a new 25 basis points for properties that qualify for the Section 232 Green MIP. For an average FHA Section 232 insured loan transaction of $12.5 million, the FHA estimates that the borrower will save $93,000 in upfront mortgage insurance premiums for many types of loans and tens of thousands of dollars in annual mortgage insurance premiums depending on the type of the loan. This significant reduction in mortgage insurance premiums will ultimately reduce both the upfront and ongoing costs of servicing mortgage debt so that owners committed to maintaining energy efficient facilities can invest capital in their operations.
Section 232 Green MIP reductions will apply. new Section 232 mortgage insurance applications where the facility owner demonstrates upon application to FHA that the property will achieve a certain industry-recognized green building certification standard and achieve significant, measurable energy and water efficiency improvements. Other requirements include:
- For properties that have already achieved a certain green building standard and that are refinanced at a lower MIP, the proceeds must be used to complete additional efficiency improvements and thus achieve the next level of green certification standards.
- The property owner must certify that they have achieved or will strive to achieve and maintain a score of 75 or better on the 1-100 ENERGY STAR score using the EPA Portfolio Manager for building type Senior Care Community.
- MIP rates will not be changed for initially or final approved FHA Section 232 insured loans in connection with interest rate reductions or loan modifications.
FHA plans to finalize and publish its application requirements for lenders to begin using the program with their borrowers in the future, with the intention of beginning to receive applications that may qualify for the Section 232 green MIP reduction at a later date this year.
Regarding FHA Section 232 Mortgage Insurance for the Residential Facility Program
FHA’s Office of Health Care Programs administers the Section 232 Housing Mortgage Insurance Program, which insures loans to finance the construction, significant rehabilitation, acquisition or refinancing of qualified nursing homes, assisted living facilities, and boarding and nursing homes. As of March 2022, the FHA had active insurance on more than 3,700 mortgages, these facilities nationwide with a total outstanding principal balance of $32.5 billion.