Changes in Certain Office of Healthcare Programs Insurance Premiums

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Published

May 19, 2022

Issuing agencies

Housing and Urban Development Department

Abstract

The Office of Healthcare Programs (OHP) announces proposed mortgage insurance premium (MIP) changes to the October 2, 2015, notice, for certain commitments issued or reissued beginning October 1, 2022. Under this Notice, MIP rates for mortgage insurance under the Federal Housing Administration's (FHA) Multifamily Housing Insurance programs will not change (see the January 28, 2016, Federal Register). The proposed MIP change under the Office of Healthcare Programs will promote the President's climate change initiatives. Lastly, this Notice will include the MIP rates for OHP's Office of Residential Care's (ORCF) Section 232, Fire Safety Equipment Loan program.

Full Text

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<title>Federal Register, Volume 87 Issue 97 (Thursday, May 19, 2022)</title>
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[Federal Register Volume 87, Number 97 (Thursday, May 19, 2022)]
[Notices]
[Pages 30510-30513]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2022-10539]

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DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

[Docket No. FR-6302-N-01]

Changes in Certain Office of Healthcare Programs Insurance
Premiums

AGENCY: Office of the Assistant Secretary for Housing--Federal Housing
Commissioner, HUD.

ACTION: Notice.

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SUMMARY: The Office of Healthcare Programs (OHP) announces proposed
mortgage insurance premium (MIP) changes to the October 2, 2015,
notice, for certain commitments issued or reissued beginning October 1,
2022. Under this Notice, MIP rates for mortgage insurance under the
Federal Housing Administration's (FHA) Multifamily Housing Insurance
programs will not change (see the

[[Page 30511]]

January 28, 2016, Federal Register). The proposed MIP change under the
Office of Healthcare Programs will promote the President's climate
change initiatives. Lastly, this Notice will include the MIP rates for
OHP's Office of Residential Care's (ORCF) Section 232, Fire Safety
Equipment Loan program.

DATES: Comments are due on or before: June 21, 2022.

ADDRESSES: Interested persons are invited to submit comments regarding
this Notice. All submissions must refer to the above docket number and
title. There are two methods for submitting public comments:
1. Electronic Submission of Comments. Interested persons may submit
comments electronically through the Federal eRulemaking Portal at
<a href="https://www.regulations.gov">https://www.regulations.gov</a>. HUD strongly encourages commenters to
submit comments electronically. Electronic submission of comments
allows the author maximum time to prepare and submit a comment, ensures
timely receipt by HUD, and enables HUD to make them immediately
available to the public. Comments submitted electronically through the
<a href="https://www.regulations.gov">https://www.regulations.gov</a> website can be viewed by other submitters
and interested members of the public. Commenters should follow
instructions provided on that site to submit comments electronically.
2. Submission of Comments by Mail. Members of the public may submit
comments by mail to the Regulations Division, Office of General
Counsel, Department of Housing and Urban Development, 451 7th Street
SW, Room 10276, Washington, DC 20410-0500. Due to security measures at
all federal agencies, however, submission of comments by standard mail
often results in delayed delivery. To ensure timely receipt of
comments, HUD recommends that comments submitted by standard mail be
submitted at least two weeks in advance of the deadline. HUD will make
all comments received by mail available to the public at <a href="https://www.regulations.gov">https://www.regulations.gov</a>.

Note: To receive consideration as public comments, comments must
be submitted through one of the two methods specified above. Again,
all submissions must refer to the docket number and title of the
notice.

No Facsimile Comments. Facsimile (FAX) comments will not be
accepted.
Public Inspection of Public Comments. All properly submitted
comments and communications regarding this Notice submitted to HUD are
available for public inspection and copying between 8 a.m. and 5 p.m.
weekdays at the above address. Due to security measures at the HUD
Headquarters Building, an advance appointment to review the public
comments must be scheduled by calling the Regulations Division at 202-
708-3055 (this is not a toll-free number). Copies of all comments
submitted are available for inspection and downloading at <a href="http://www.regulations.gov">http://www.regulations.gov</a>.

FOR FURTHER INFORMATION CONTACT: John Hartung, Director, Policy, Risk
Analysis & Lender Relations Division, Office of Residential Care
Facilities, Office of Healthcare Programs, Office of Housing,
Department of Housing and Urban Development, 1222 Spruce Street, St.
Louis, MO 63103-2836; telephone: 314-418-5238 (this is not a toll-free
number).

SUPPLEMENTARY INFORMATION:

I. Background

Section 203(c)(1) of the National Housing Act authorizes the
Secretary to set the premium charge for insurance of mortgages under
the various programs in Title II of the National Housing Act. The range
within which the Secretary may set such charges must be between one-
fourth of one percent per annum and one percent per annum of the amount
of the principal obligation of the mortgage outstanding at any time.
(See 12 U.S.C. 1709(c)(1 )).
On October 2, 2015, HUD published a Notice in the Federal Register
(80 FR 59809) announcing the MIP rates for FHA Multifamily, Health Care
Facilities, and Hospital mortgage insurance programs that had
commitments issued or reissued in FY 2016. Subsequently, on January 28,
2016, HUD Multifamily published a Notice in the Federal Register (81 FR
4926) announcing MIP rate reductions to promote affordable and green
energy-efficient housing. HUD is now proposing rate reductions for
certain Office of Healthcare Programs to achieve green and energy-
efficiency buildings for the Office of Residential Care Facilities
(ORCF), Section 232 program. A February 2017 article from Science
Direct that studied energy consumption costs for healthcare facilities
states that ``Healthcare facilities are considered major energy
consumers due to their need for reliable electricity and thermal energy
supplies for heating, ventilation, lighting, air conditioning and the
use of medical and non-medical equipment.'' In response to the
President's climate initiative, and global initiatives to combat
climate change, and in-line with the Department's and Administration's
goals to reduce energy consumption and utility costs throughout the
building sector, rate reductions are proposed to promote healthy,
green, and energy-efficient healthcare facilities.
HUD's Multifamily Housing Mortgage Insurance regulation at 24 CFR
207.254 provides as follows:
Notice of future premium changes will be published in the Federal
Register. The Department will propose MIP changes for multifamily
mortgage insurance programs and provide a 30-day public comment period
for the purpose of accepting comments on whether the proposed changes
are appropriate.
This provision also applies to mortgages insured under the Section
232 Program (See 24 CFR 232.251).
Pursuant to the 30-day comment procedure, this Notice announces MIP
changes for FY 2023, for certain programs authorized under the National
Housing Act (the Act) (12 U.S.C. 1709(c)(1)), and specifically for the
Section 232 program. These changes will become effective October 1,
2022.

II. This Notice

This Notice announces that HUD is changing MIPs for FHA-insured
loans on properties under specific Office of Healthcare insurance
programs. In FY 2013, FHA increased MIPs to compensate for increased
risk to the FHA-insurance fund after the housing market crisis. Over
the past eight years since the MIP rate was adjusted, HUD has continued
to improve underwriting standards to further mitigate risk to the FHA
portfolio, including improved reviews of appraised values, heightened
examination of quality of care history, and strengthened requirements
for borrower and parent entity experience/capacity.
The proposed MIP changes reflect HUD's commitment to supporting the
long-term viability and efficiency of its insured portfolio, in line
with the President's climate agenda. They are also prudent in light of
the financial health of the Section 232 portfolio and the favorable
impact that the analogous MIP changes to the FHA Multifamily programs
have had over the past five years.

A. Green and Energy-Efficient Healthcare Facilities

Annual MIP will change from current rates generally between 45 and
77 basis points, to 25 basis points for certain Section 232, Office of
Residential Care Facilities' FHA-insured loan types. This policy
intends to encourage owners to adopt higher standards for construction,
rehabilitation, repairs, maintenance, and property operations that are
more energy efficient and sustainable than

[[Page 30512]]

traditional approaches to such activities. Those measures will result
in projects with greater energy and water efficiency, reduced operating
costs, improved indoor air quality and resident comfort, and reduced
overall impact on the environment. To facilitate this, mortgage
proceeds will be used to retrofit properties to meet the stringent
efficiency standards required to access this lower MIP premium.
To qualify:
Upon application for FHA mortgage insurance, the owner must
evidence that the project will achieve, an industry-recognized standard
for green building certification. For properties that have already
achieved a green building standard certification and that are
refinancing with this lower MIP premium, proceeds must be used to
complete further efficiency upgrades and thereby achieve the next-level
green certification standards.\1\ Acceptable, independently verified
standards include the Enterprise Green Communities Criteria, U.S. Green
Building Council's LEED-Home, LEED-Highrise, LEED-Midrise, LEED-
Lowrise, LEED-NC, LEED-Healthcare Facilities, EarthCraft Multifamily,
Earth Advantage Multifamily, the National Green Building Standard
(NGBS), Passive Building Certification or EnerPHit Retrofits
certification from the Passive House Institute US (PHIUS),
International Passive House Association, or the Passive House
Institute, and Living Building Challenge Certification from the
International Living Future Institute, or other industry-recognized
green building standards in the sole discretion of HUD's Office of
Residential Care Facilities.
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\1\ HUD recognizes that the owners of projects that become
insured with this newly announced Green MIP rate may, in later
years, seek refinancing of that loan. Subsequent program guidance
will address procedures for continuing that Green MIP rate in the
new loan.
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Further, the owner must certify that it has achieved, or will
pursue, achieve, and maintain a score of 75 or better on the 1-100
ENERGY STAR score, using EPA's Portfolio Manager for the Senior Care
Community building type. The reasonableness of achieving and
maintaining the specified, independent green building standard, and the
score of 75 or better in Portfolio Manager, must be verified by the
independent conclusion of the qualified assessor preparing the physical
condition assessment, and supported by the physical condition
assessment report and recommendations, the American Society of Heating,
Refrigerating and Air-Conditioning Engineers (ASHRAE) level II energy
audit (required for existing structures only), and plans for new
construction, or rehabilitation, repairs, and operations and
maintenance. The physical condition assessment report submitted with
the mortgage insurance application must include a certification from
the architect, engineer, or certified energy auditor that the planned
scope of work is reasonably sufficient to achieve and maintain the
specified certification. Additionally, the owner must submit to HUD
evidence that the specified, independent green building standard has
been achieved, and provide a copy of the Portfolio Manager report
showing building performance at or above 75, at the time those
standards were achieved, and no more than 24 months after completion of
new construction, substantial rehabilitation or renovations, or 24
months after break-even occupancy. The owner must submit the Portfolio
Manager report annually to HUD showing that the property has maintained
its efficiency performance at or above 75. HUD anticipates issuing
implementation guidance via Mortgagee Letter or supplemental Notice.
Additionally, the Borrower's obligations with respect to the reduced
MIP will be set forth in the Borrower Regulatory Agreement, the non-
compliance with which may result in HUD's pursuit of all available
rights and remedies.
To ensure that the benefits of these MIP rates directly benefit the
residential care properties and residents, lenders submitting
applications for loans using this MIP rate are limited in the total
loan fees they may charge on any loan greater than $2 million, to no
more than 5 percent of the insured loan amount. Loan fees include (a)
origination and placement fees as permitted by the MAP Guide, plus (b)
trade profit, trade premium or marketing gain earned on the sale of the
GNMA security at a value above par, even if the security sale is
delayed until after endorsement, minus (c) loan fees applied by the
Mortgagee to its legal expenses incurred in connection with loan
closing. This 5 percent limitation on loan fees shall further apply to
a later Interest Rate Reduction, if any, of the loan.

III. MIPs for FHA's Office of Healthcare Programs Mortgage Insurance
Programs Effective on October 1, 2022

HUD is changing MIPs for FHA-insured loans for specific properties
under The Office of Residential Care Facilities, Section 232 Mortgage
Insurance program. The chart below details the MIP rates for each rate
category, and each type of FHA mortgage insurance covered under this
Notice.
This Notice also includes the upfront and annual MIP rates for the
Office of Residential Care Facilities Section 232/223(i) Fire Equipment
Safety Loan program. The MIP rates for that program are encompassed in
24 CFR 232.805 but were not specifically referenced in the most recent
Notice addressing Section 232 MIP rates, so those 232/223(i) rates are
being included here simply for clarity purposes.

FHA Office of Health Care Facilities Insurance Premiums by Rate & Category
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Green and
energy Green and
Current efficient: energy
upfront upfront Current annual efficient:
Category capitalized capitalized MIP basis annual MIP
MIP* basis MIP* basis points basis points,
points points, effective 10-
effective 10- 01-22
01-22
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Section 232 Healthcare Facilities (SNF, ALF,
B&C):
232 NC/SR Healthcare Facilities w/o LIHTC... 100 25 77 25
232 NC/SR--Assisted Living Facilities with 100 25 45 25
LIHTC......................................
232/223(f) Refi for Healthcare Facilities w/ 100 25 65 25
o LIHTC....................................
232/223(f) Refi for Healthcare Facilities 100 25 45 25
with LIHTC.................................
232/223(a)(7) Refi of Healthcare Facilities 50 25 55 25
w/o LIHTC..................................
232/223(a)(7) Refi of Healthcare Facilities 50 25 45 25
with LIHTC.................................
223(d) Operating Loss Loan for Healthcare 100 n/a 95 n/a
Facilities.................................

[[Page 30513]]

241(a) Supp. Loan for Healthcare Facilities 100 25 72 25
w/o LIHTC..................................
241(a) Supp. Loan for Healthcare Facilities 100 25 45 25
with LIHTC.................................
223(i) Fire Safety Equipment Loan........... 100 n/a 100 n/a
Section 242 FHA Hospital Insurance Program:
242 Hospitals............................... 100 n/a 70 n/a
223(a)(7) Refinance of Existing FHA-Insured 50 n/a 55 n/a
Hospital...................................
223(f) Refinance or Purchase of Existing Non- 100 n/a 65 n/a
FHA-Insured Hospital.......................
241(a) Supplemental Loans for Hospitals..... 100 n/a 65 n/a
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* Upfront premiums for the Office of Health Care Programs are capitalized and based on the first year's annual
MIP for the applicable rate category and remain at 100 basis (one percent) as specified in 24 CFR 232.805,
except for 223(a)(7) loans where the upfront rate remains at 50 bps as published in the 2015 FR Notice for
FY16 MIP Rates. Up front and annual premiums for the Green/Energy program are noted above. MIP premiums are
separate and apart from (and in addition to) the application fees.

The MIP rates will become effective for FHA firm commitments issued
or reissued on or after October 1, 2022. MIP rates will not be modified
for any loans that close or reach initial endorsement prior to October
1, 2022. MIP rates will not be modified on FHA-insured loans initially
or finally endorsed, in conjunction with Interest Rate Reductions, or
in conjunction with Loan Modifications.

IV. Finding of No Significant Impact

A Finding of No Significant Impact (FONSI) with respect to the
environment has been made in accordance with HUD regulations at 24 CFR
part 50, which implement section 102(2)(C) of NEPA (42 U.S.C.
4332(2)(C)).
The FONSI is available for public inspection between 8 a.m. and 5
p.m. weekdays in the Regulations Division, Office of General Counsel,
Department of Housing and Urban Development, 451 7th Street SW, Room
10276, Washington, DC 20410-0500. Due to security measures at the HUD
Headquarters building, an advance appointment to review the docket file
must be scheduled by calling the Regulations Division at 202-708-3055
(this is not a toll-free number). Hearing or speech-impaired
individuals may access this number through TTY by calling the Federal
Relay Service at 800-877-8339 (this is a toll-free number).

Lopa P. Kolluri,
Principal Deputy Assistant Secretary, Office of Housing--Federal
Housing Administration.
[FR Doc. 2022-10539 Filed 5-18-22; 8:45 am]
BILLING CODE 4210-67-P

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