The Section 231 insures mortgage loans to facilitate the construction
and substantial rehabilitation of multifamily rental housing for
elderly persons (62 or older) and/or persons with disabilities.
Section 231 insures lenders against loss on mortgages. Section 231
was designed to increase the supply of rental housing specifically
for the use and occupancy of elderly persons, and/or persons with
disabilities. However, few projects have been insured under Section
231 in recent years;developers have opted to use Section 221(d)(4).
Type of Assistance:
FHA mortgage insurance for HUD-approved lenders.
Insured mortgages may be used to finance the construction and substantial
rehabilitation of detached, semidetached, walk-up, or elevator type
rental housing designed specifically for elderly or handicapped
individuals consisting of eight or more dwelling units. For nonprofit
sponsors, the maximum loan amount is 100 percent of the estimated
replacement cost of the building (or 100 percent of project value
for rehabilitation projects). For all other sponsors, the maximum
loan is 90 percent of the replacement cost (or 90 percent of project
value for rehabilitation projects). Contractors for new construction
or substantial rehabilitation projects are required to comply with
prevailing wage standards under the Davis-Bacon Act.
Mortgagors include private profit-motivated developers, and non-profit
All elderly or persons with disabilities are eligible to occupy
apartments in a project whose mortgage is insured under the program.
The sponsor has a preapplication conference with the local HUD Multifamily
Hub or Program Center to determine the feasibility of the project.
The sponsor must then submit a site appraisal and market analysis
(SAMA) application (new construction projects), or a feasibility
application (substantial rehabilitation projects). Following HUD's
issuance of a SAMA or feasibility letter, the sponsor submits a
firm commitment application through a HUD-approved lender for processing.
Considerations include market need, zoning, architectural merits,
capabilities of the borrower, and availability of community resources.
If the project meets program requirements, the local Multifamily
Hub or Program Center issues a commitment to the lender for mortgage
This program is authorized by Section 231 of the National Housing
Act, as amended, Public Law 86-372 (73 U.S.C. 654 and 12 U.S.C.
1715 (V))). Program regulations are found in 24 CFR 231. The basic
program instructions are in HUD Handbook 4570.1 - Housing for the
Elderly for Project Mortgage on available on HUDclips.
The program is administered by the Office of Multifamily Housing
In fiscal year 2013, the Department insured mortgages for 3 projects
with 302 units, totaling $ 17.0 million.