Operating loss loans
HUD 223(d): operating loss loans for FHA-insured apartments
Section 223(d) lets FHA insure a second loan that covers operating losses at an apartment property that already has an FHA-insured mortgage. HUD suspended new 223(d) commitments for apartments starting in fiscal 2013 and repeated the suspension each year through fiscal 2016. We found no HUD notice lifting it, so treat 223(d) for apartments as unavailable unless HUD confirms otherwise.
What the statute provides
Section 223(d) of the National Housing Act authorizes FHA to insure loans that cover the operating losses of a project that already has an FHA-insured mortgage (other than a 1-4 family property). An operating loss is the amount by which taxes, mortgage interest, mortgage insurance premiums, hazard insurance and the cost of maintenance and operation exceed the project’s income.
| Lease-up losses, 223(d)(2) | Later losses, 223(d)(3) | |
|---|---|---|
| When the loss occurred | First 24 months after completion | Any stretch of up to 24 consecutive months in the first 10 years after completion |
| Projects | Any FHA-insured project | Not subsidized, as HUD defines it |
| Loan amount | Up to the operating loss | Up to 80% of the owner’s unreimbursed cash contributions, and never more than the loss |
| Timing | Loan made within 10 years after that stretch ends |
HUD cannot use both paragraphs for the same months. Any 223(d) loan:
- bears a rate agreed between borrower and lender;
- runs no longer than the remaining term of the original mortgage;
- is insured under the same section of the Act as the original mortgage;
- carries a premium at the same rate as the original mortgage, set by the statute itself;
- defaults together with the original mortgage: missing a payment on either puts both in default.
The MAP Guide treats 223(d) loans as one of two kinds of FHA-insured second mortgages (the other is the 241(a) supplemental loan), and lets a 223(d) balance be counted in the payoff of a later 223(a)(7) refinance, the one exception to the rule that operating-deficit debt cannot be refinanced.
Why it is not in use for apartments
The statute is still on the books. The program is not. In its fiscal 2013 premium notice, HUD said it would suspend issuing and reissuing commitments for 223(d) operating loss loans to multifamily projects with a primary FHA mortgage, because the program required positive credit subsidy (an appropriation to cover expected losses). The FY2014, FY2015 and FY2016 notices said HUD would continue the suspension. The 2012 table had shown 80 basis points for 223(d) apartments; from FY2013 the table showed “N/A”.
The 2016 and 2025 premium notices do not list 223(d) for apartments at all. We found no Federal Register notice or Mortgagee Letter reinstating it.
What we could not confirm
- Whether HUD would accept a 223(d) application for an apartment property today. The evidence points to no, but HUD has not published a statement either way since 2015.
- What premium would apply if it did. The statute ties it to the original mortgage’s rate, but HUD’s current premium table is silent on 223(d).
- Healthcare 223(d) loans for Section 232 facilities are a separate program under HUD’s Office of Healthcare Programs and are not covered here.
If your FHA-insured property is running a deficit, the realistic tools are the ones in the FAQ below, or a conversation with your servicer. We are happy to look at the numbers.
Sources
- 12 U.S.C. 1715n(d), Section 223(d) of the National Housing Act
- 77 FR 49007, FY2013 multifamily MIP notice (Aug. 15, 2012), section on positive credit subsidy programs
- 78 FR 59366, FY2014 multifamily MIP notice (Sept. 26, 2013)
- 80 FR 59809, FY2016 multifamily MIP notice (Oct. 2, 2015)
- 90 FR 45789, Changes in Mortgage Insurance Premiums for FHA multifamily programs (Sept. 23, 2025)
- HUD MAP Guide, Handbook 4430.G, 2020 edition, sections 3.1.17 and 18.3.3
Checked against these sources on October 30, 2026. HUD changes program rules by Mortgagee Letter and Federal Register notice; the lender's commitment governs any loan.
Short answers
Can I get a HUD 223(d) operating loss loan on an apartment property today?
Probably not. HUD's FY2013 premium notice suspended new 223(d) commitments for apartments because the program needed positive credit subsidy, and the FY2014 through FY2016 notices continued the suspension. The 2016 and 2025 premium tables do not list 223(d), and we found no notice reinstating it. Ask HUD or a MAP lender to confirm before planning around it.
What losses does 223(d) cover under the statute?
Two kinds. Losses in the first 24 months after the project is completed, with the loan capped at the loss. Or, for projects that are not subsidized, up to 80% of the cash the owner put in to cover losses during a stretch of up to 24 consecutive months in the first 10 years, with the loan made within 10 years after that stretch ends.
What counts as an operating loss?
The statute defines it as the amount by which taxes, mortgage interest, mortgage insurance premiums, hazard insurance and the cost of maintaining and operating the project exceed the project's income.
What are the alternatives if my FHA-insured property is losing money?
For new construction, the 221(d)(4) working capital escrow and initial operating deficit escrow are meant to absorb lease-up losses. For an existing property, a 241(a) supplemental loan can fund repairs or improvements, and a 223(a)(7) can lower debt service if today's rate or premium beats the existing loan's. Otherwise the conversation is with the loan servicer.