Supplemental Loans

241(a) Supplemental Loan

The HUD 241(a) program is a "supplemental" loan option for borrowers with an existing HUD loan. The supplemental loan can be used to finance repairs, energy conservation measures, and additions. Additional units can be constructed on the site of the existing project, or on adjacent land parcels.

The program is designed to allow property owners to extend the life of their project and remain competitive in the marketplace and/or to add units in a slightly different way than the 221(d)(4) construction program. As 241(a) is a supplemental program; it does not require the refinancing or payoff of the underlying (existing) HUD first mortgage.

The term of the 241(a) loan must be coterminous with the existing HUD mortgage unless that remaining term is 25 years or less. If less than 25 years, the new 241(a) term may extend up to 40 years, subject to HUD approval.

Third party reports, reserves, escrows, and Davis-Bacon requirements are generally identical to the 221(d)(4) new construction program's requirements. The 241(a) program is rarely utilized compared to the 221(d)(4), 223(f), and 223(a)(7) multifamily programs.