FNMA Fills Assisted Living Financing Need, Acts as Bridge to HUD 232

Senior housing operators looking for quick funding as well as long-term financing have a new option from Fannie Mae. The FNMA ARM 7/6 is a 1-month LIBOR-based product that allows for acquisitions or refinances and comes with attractive features for borrowers looking for flexibility.

“This new Fannie Mae option lets assisted living providers get a seven-year loan but make lower monthly payments as if it were a 30-year loan,” said Nick Gesue, Senior Vice President of Lancaster Pollard Mortgage Company.

Available up to 75% loan-to-value for assisted living facilities, the product gives borrowers the ability to take advantage of low interest rates and convert into a fixed rate if they decide to lock in long-term financing. Faced with a large backlog of applications for HUD’s 232 program, many assisted living borrowers are looking for non-recourse financing to buy or renovate properties, but don’t have time to wait for applications to clear the HUD backlog, said Gesue.


“This [product] is going to help solve that problem for many,” he said.

Despite HUD making additional hires and bringing on a consultant to deal with the “queue” that has built up, it could take some time for processing times to improve. With reasonable pre-payment penalties, the characteristics of FNMA’s 7/6 can provide “a bridge to more permanent financing” or converting it to a fixed rate loan.

According to Gesue, assisted living providers can obtain financing from FNMA in 60 to 90 days and then after a year, can obtain longer term financing through HUD’s 232 program.


“By the time the refinance got through the long HUD backlog, the prepayment lockout will have likely burned off,” he said.

Not everyone who qualifies for HUD financing will meet FNMA’s requirements, says Gesue.

“Fannie Mae has a pretty high threshold for an acceptable borrower,” he says. The GSE requires that borrowers own at least five properties for a period of five years, “you have to have sizable amount of exposure and FHA doesn’t have that requirement.”

Even so, Fannie Mae financing is a great option for assisted living facilities.

“The ability to convert the loan provides a huge amount of options… if you decide to stick with the ARM product, borrowers have a great opportunity to take advantage of low interest rates.”