It’s official—beginning early next year, senior housing companies will have an easier time securing financing through the U.S. Office of Housing and Urban Development (HUD).
HUD on Tuesday announced it has finalized its latest handbook for the Section 232 Healthcare Mortgage Insurance Program. This latest handbook contains some new rules that directly impact the senior housing industry, all of which take effect on Jan. 5, 2017.
Assisted living and other residential care facilities can use Section 232 for several different purposes, including to finance new construction, purchases or substantial rehabilitation. Facilities can also use the LEAN program to refinance.
Beginning Jan. 5, seasoning requirements will be reduced; this, in specific cases, enables senior housing companies to act more quickly to refinance bridge loans through 232.
The new seasoning requirements preserve high leverage standards, maintaining the two-year limit if the requested 232 loan is equal to or greater than 71% of loan-to-value (LTV). If LTV is lower, however, the borrower can refinance a bridge loan without waiting the two years, based on the percent of existing debt utilized for project purposes.
Additionally, the new handbook permits both identity of interest (IOI) and partner buy-out scenarios to be refinanced without two-year seasoning if they meet specific requirements, including timelines for buyback provisions.
Several senior housing lenders, including Columbus, Ohio-based RED Capital, have expressed support for the changes.
“We believe it’s going to be a net positive for borrowers and lenders,” Jason Smeck, RED’s managing director of seniors housing and health care, told Senior Housing News when the rules first were proposed in May.
Written by Mary Kate Nelson
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