The Department of Housing and Urban Development reached its highest level of senior housing lending through its Section 232 program in fiscal year 2013, according to data released by the agency and analyzed by Lancaster Pollard this week.
HUD insured $5.82 billion in loan volume, outpacing the previous year’s total by more than 6%.
The loan activity comprised 766 loans spanning 49 lenders, with Lancaster Pollard closing the greatest percentage of loan volume at $811.7 million or 13.9% of the total, the company said. The HUD results were “impressive,” considering several hurdles the agency faced throughout the fiscal year, said Brian Pollard, senior managing director of Lancaster Pollard.
“Refinance loans continued to represent the large majority of program activity as property owners took advantage of historically low rates that prevailed through much of the fiscal year,” Pollard said. “HUD’s record production was particularly impressive in light of a few government hiccups, including a several week delay in passage of a continuing resolution to fund the government in March and the exhaustion of HUD loan commitment authority in September due to program demand. It is estimated that these two events reduced loan production by approximately $300 million.”
Given the rising interest rate environment, Lancaster Pollard foresees less refinance activity in the coming fiscal year, which will likely lead to lower loan volume within HUD’s Lean 232 program.
“Looking forward, we expect overall program volumes to decline somewhat in fiscal year 2014 as much of the economically driven refinance activity is curtailed due to the rise in rates that began in May 2013,” he said. “Approximately 60 percent of the HUD Lean’s volume in 2013 was the refinance of existing HUD loans through the 223(a)(7) program and rate reduction is the primary reason these loans are pursued. However, we expect refinance of properties coming into the program for the first time to remain strong as other features of the program remain appealing.”
While HUD has not commented on the outlook for fiscal year 2014, many HUD lenders have speculated that a lower share of refinance activity may lead to more new construction lending within the agency as a result.
Written by Elizabeth Ecker