The hospital must grant the 242 program
leader a first mortgage on the entire hospital,
including all real estate and improvements
being financed. (Note: Exceptions may
include leased equipment, off-site property,
capital associated with affiliations, cityand/
or county-owned facilities, etc.)
Full escrows for property taxes and all
applicable insurance are funded at closing.
A Replacement Reserve account must be
established at closing and is made available
for replacement of short-lived depreciable
If the loan includes repairs or capital
improvements to be completed after closing, an
additional 20% repair escrow must be funded
with cash or a letter of credit.
This is a non-recourse loan.
Long loan term - up to 25 years, fully
Low, fixed interest rates.
v Most affirmative and negative loan covenants
typically found in conventional loan agreements
The Loan is assumable subject to CMI and
Non-profit hospitals can utilize mortgage
insurance as a credit enhancement to issue tax
exempt bonds. Depending on market
conditions, a commercial bond insurer may be
utilized to achieve an “AAA” bond rating. Of
note, non-profit organizations may elect to
issue taxable notes in conjunction with GNMA
mortgage insurance to achieve the equivalent
of an “AAA” bond rating.
For-profit hospitals can utilize mortgage
insurance in conjunction with GNMA mortgage
insurance to issue collateralized securities.
Click here to download a PDF of this program.