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Mortgage Insurance for Supplemental Loans for Multifamily Projects: Section 241(a)

Section 241(a) insures mortgage loans to finance repairs, additions, and improvements to multifamily rental housing and health care facilities with FHA insured first mortgages or HUD-held mortgages.

Section 241(a) insures lenders against loss on mortgage defaults. The program is intended to keep the project competitive, extend its economic life, and to finance the replacement of obsolete equipment. Insured mortgages finance repairs, additions, and improvements to multifamily projects, group practice facilities, hospitals, or nursing homes already insured by HUD or held by HUD. Major movable equipment for insured nursing homes, group practice facilities, or hospitals may be covered by a mortgage under this program.

Type of Assistance:
FHA mortgage insurance for HUD-approved lenders.

Eligible Activities:
Insured mortgages may finance either: (1) additions and improvements of multifamily housing projects, nursing homes, hospitals, and assisted living facilities already subject to HUD/FHA insured mortgages or mortgages held by HUD; (2) finance energy conservation improvements. The maximum insurable loan is 90 percent of the value of the addition or improvement, or an amount which, when added to the outstanding balance of the existing insured mortgage, does not exceed the amount insurable under the program pursuant to the mortgage covering such project of facility that is insured. Where the project is covered by a mortgage held by HUD the principal amount of the loan shall be in an amount acceptable to the Secretary. Contractors must comply with prevailing wage requirements under the Davis-Bacon Act. 241(a) for apartments requires appropriated credit subsidy, which is limited.

Eligible Borrowers:
Owners of a multifamily project or facility already subject to a mortgage insured
or held by HUD.

Eligible Customers:
Individuals, families, and owners of multifamily projects.

The sponsor will have a pre-application conference with the local HUD Multifamily Region to determine the feasibility of the proposed improvements before submitting a firm commitment application. The sponsor must then submit a firm commitment application to the local Multifamily Region through a HUD-approved lender for processing. If the project meets program requirements, the local Multifamily Region issues a commitment to the lender for mortgage insurance.

Technical Guidance:
This program is authorized under the National Housing Act, as amended,
Section 241, Public Law 90-448 (12 U.S.C. 1715) and Public Law 94-375
(12 U.S.C. 1715Z-6). The program regulations are found in 24 CFR 241. The basic program instructions are in HUD Handbook 4585.1-Supplemental Loans for Project Mortgage Insurance available on HUDclips. The program is administered by the Office of Multifamily Housing Programs, Office of Production, Program Administration Division.

Program Accomplishments: In FY2023, the Department insured mortgages for 6 projects with 728 units, totaling $27.6 million.

If you have questions regarding local projects/ properties proposals, financing or housing assistance, please click this link to find your closest local HUD Office and their Multifamily Production contacts.

If you have questions about HUD programs, policies and guidance in the MAP Guide, please click this link to use the HUD Exchange, "Ask A Question" form.

Last Updated: 10/11/2023