1. HUD Partners
  2. Office of Residential Care Facilities

Residential Care Facilities

The Office of Residential Care Facilities administers the Section 232 loan program. Section 232 is an FHA loan product that provides mortgage insurance for residential care facilities. Nursing homes, assisted living facilities, and board and care are all examples of this type of housing (a project may include more than one type).

Section 232 may be used to finance the purchase, refinance, new construction, or substantial rehabilitation of a project. A combination of these uses is acceptable - e.g. refinance of a nursing home coupled with new construction of an assisted living facility.

General Overview

Basics of FHA Insurance

HUD/FHA provides mortgage insurance on loans that cover residential care facilities. Known as a Section 232 loan, these loans help finance nursing homes, assisted living facilities, and board and care facilities. FHA mortgage insurance provides lenders with protection against losses as the result of borrowers defaulting on their mortgage loans. The lenders bear less risk because FHA will pay a claim to the lender in the event of a borrower's default. Loans must meet certain requirements established by FHA to qualify for insurance. Proposed projects are evaluated on the basis of whether the proposal is an acceptable insurance risk for the FHA Insurance Fund. It is not a competitive process.

Section 232 may be used to finance the purchase, refinance, new construction, or substantial rehabilitation of a project. A combination of these uses is acceptable - e.g. refinance of a nursing home coupled with new construction of an assisted living facility.

Processing of Section 232 Loans

HUD developed its Lean process in 2008 for Section 232 applications (it only applies to Section 232 applications). Lean is not an acronym, but rather is a methodology based on the Toyota model to increase efficiency by reducing waste. Reductions in processing variability and non-value added activities are explored using value stream mapping. Full use of the internet and value added software tools for application submission, underwriting and closing, as well as punch lists are resources currently being developed and implemented for the Section 232 program.

Previously, loans were processed under Multifamily Accelerated Processing (MAP) or Traditional Application Processing (TAP) by the local HUD Field Office. Non-Section 232 projects will continue to be processed under MAP or TAP. Whichever process is used, applications for mortgage insurance are assembled and underwritten by FHA-Approved Lenders before being submitted to HUD for processing of the Firm Commitment.

HUD's Lean Process

HUD’s new Lean process employs standardized work products and processes to obtain a consistent, timely results. The following are some of the changes implemented with the Lean process:

  1. We have developed standardized checklists, statements of work for third party work, certifications, and templates for the lenders to use in their assembly of the application package. Moreover, we have developed standardized punchlists for HUD staff to use in their underwriting of submitted applications.
  2. We have removed portions of the application process/requirements for submittal that were duplicative or not necessary (e.g. no need to submit closing related documents that are submitted with the Firm Application twice, removal of forms that are not needed, development of consolidated certifications, etc).
  3. We have revised the third party appraisal requirements so that the appraisal is a market appraisal - no requirement to use HUD forms and no proprietary earnings carve out.


Effective September 1, 2008, all Section 232/223(f)’s were required to be processed using the new Lean process. On March 1, 2009, all other Section 232 loans were included in the new Lean process.

Information for Lenders and Borrowers

For Potential Borrowers

  • As the FHA-Approved Lender is the key player in the process, we encourage potential borrowers to contact a lender as early in the process as possible. The lender will walk you through the process - from initial discussions to underwriting and submittal of the application to the closing of the loan. Most of the lenders on the “Approved Lender List” marked with an asterisk can originate Section 232 Lean Loans. The "Approved Lender List” is available here.
  • The Section 232 Handbook provides useful Section 232 program information and is located here.

For Potential Lenders

  • We require the lender to be an FHA Approved Lender, a MAP-Approved lender and the lender’s underwriter must also be a MAP-Approved Healthcare underwriter. Additional requirements for Section 232 Lean approval are detailed in Section 1, Chapter 2 of the Section 232 Handbook.
  • Information on the MAP Approval process for lenders
 

Guidance for Lenders

The ORCF Environmental Resources provides useful website links related to the environmental review process. For further information, please refer to Handbook 4232.1, Section II, Chapter 7 (here).

Barrier Design Guidance For HUD Assisted Projects Near Hazardous Facilities Guidebook 6600.G

Delegation Memorandum Housing – Section 106 (SHPO) Consultation (Effective to December 31, 2027)

Environmental Justice

Environmental Remediation Estimating Methods - EPA Guidance: How to Develop and Maintain a Building Asbestos Operations and Maintenance (O&M) Program

EPA Map of Radon Zones

Flood Insurance Rate Map (FIRM)

FEMA Region II Coastal Analysis and Mapping

FEMA Design and Construction in Coastal A Zones

HEROS – ORCF Guidance for Using HEROS as an FHA Partner

HUD Environmental Review Online System (HEROS)

HUD Exchange – Guidance on Environmental Topics

HUD Guidance for Categorizing an Activity as Maintenance for Compliance with HUD’s Environmental Regulations, 24 CFR Parts 50 and 58

HUD Historic Preservation Section 106 Compliance

HUD Tribal Consultation Website

HUD Tribal Directory Assessment Tool (TDAT)

HUD’s Day/Night Noise Level Electronic Assessment Tool

HUD’s Acceptable Separation Distance (ASD) Electronic Assessment Tool

Propane Aboveground Storage Tank – Sample Compliance Memo with NFPA

State Historic Preservation Offices

Additional Guidance on Maintenance in Environmental Review of Office of Housing Programs

Overview

The purpose of the 232 Healthcare Portal is to collect operator financial information and process business transactions between FHA Approved Lenders for residential healthcare facilities (FHA lenders) and FHA’s Office of Residential Care Facilities (ORCF) in a cyber secure environment. The 232 Healthcare Portal is to provide three modules that are interconnected and dependent. These modules are: (1) collect quarterly operator financial information from FHA lenders on Section 232 insured healthcare facilities, (2) process asset management transactions for FHA lenders and (3) receive loan applications and loan closings documents for Section 232 insured healthcare projects from FHA lenders.

FAQ Submission and Responses

ORCF Policy Drafting Table

Making it easier to do business with ORCF

This "Drafting Table" page will be a resource for posting drafts of some upcoming proposed policies.

The new ORCF “Drafting Table” approach utilizes a three-step process:

  • Post – ORCF will post the links to some draft policies for your review and feedback.
  • Publish – After the “Posted for Feedback” period ends and we assess the feedback received (and complete any applicable Departmental clearance), the document will be submitted for publication consistent with Department policy.
  • Effective – ORCF will provide a date on which the published ORCF content becomes effective.

Your input is important.

We value your feedback. We suggest you use the approach set forth on each content page when submitting your voluntary feedback. The content pages and applicable “due by” dates are identified in the right hand column of this page.

Things to keep in mind when providing Feedback:

  • To facilitate ORCF’s review and analysis of feedback, stakeholders are encouraged to use the “Sample Feedback Response Template” to record feedback.
  • Feedback response will be collected through the Lean Thinking at LeanThinking@hud.gov
  • Please indicate in your Email Subject Line “FEEDBACK RESPONSE FOR (List Document Here)” This will ensure responses are routed to the appropriate review team

Questions?

Please contact LeanThinking at LeanThinking@hud.gov

ORCF Drafts Posted for Feedback

Queues, Reports, and Statistics