Federal Housing Administration streamlines hospital refinancing

Hospital loan refinancing no longer contingent on new construction
Tools

The Federal Housing Administration (FHA) has released final rules on program modifications that will make it easier for hospitals to refinance their debt.

The changes will allow the FHA to modify loans or provide financing to hospitals that are not contingent on construction or other infrastructure modifications, according to the final rule published yesterday in the Federal Register.

It also allows certain hospitals to obtain financing even if they do not need to participate in FHA's hospital mortgage insurance program, reported Law360.

Under the new rules, hospitals can use only 20 percent or less of proceeds for construction purposes.

The rules establishes other criteria for the refinancing: Total operating expenses must decrease by at least one-quarter of 1 percent as a result of the new loan; the new interest rate must be at least one-half percent lower than the current rate; and the current interest rate has risen at least 1 percent since January 2008.

Applicant hospitals also have to demonstrate that existing financing has been overly restrictive or tied to onerous bond covenants, and that its financial health is dependent on refinancing, according to the FHA.

The new rules, which go into effect March 7, come as more hospitals are moving to refinance their debt to capitalize on record-low interest rates, FierceHealthFinance previously reported.

- here's the FHA final rules (.pdf) and announcement
- read the Law360 article (subscription required)

Related Articles:
Hospitals refinance debt for low interest expenses
HUD refinancing a boon for needy hospitals
Case study: Michigan hospital gets $28M to build a new facility
FHA underwrites massive hospital mortgage