New federal guidelines around mortgage insurance applications could help more senior living providers access financing.
The new U.S. Department of Housing and Urban Development (HUD) rules change a corporate credit review period of 18 months and increase the threshold for when a corporate credit review is required as it pertains to seeking HUD financing.
According to Tim Eberhardt, CFG Bank Chief Lending Officer, Bridge and HUD Loans, the changes will allow more providers to access HUD financing before having to complete that review period.
“As the values of assets increased and the program grew in scale, $90 million became a relatively low threshold to require a Corporate Credit Review, and the 18-month window provided a disincentive for borrowers to take larger portfolios at the same time,” Eberhardt told Senior Housing News.
He added: “We expect this will have a very positive impact on the senior housing and long-term care industries as it will make the 232 Program more easily accessible to more healthcare providers.”
Previous thresholds for a corporate credit review were based on a fixed total dollar amount of mortgages over time and the new guidelines are now percentage-based of HUD’s total healthcare portfolio, Eberhardt explained.
“The previous levels were set many years ago and didn’t account for inflation in the value of the assets and the size of the program,” he added.
The new rule changes the threshold for when a review is required as a percentage of unpaid principal balance of the HUD health care portfolio and limits when the Office of Risk Management is obligated to approve a corporate credit review of 2% of unpaid principal balance of the HUD health care portfolio which would “streamline the approval process,” Eberhardt said.
“This is welcome news for borrowers as not only the thresholds increased from $90 million to $193.8 million, but existing owners/operators in good standing with HUD can obtain up to $50 million in additional financing within 18 months of the last Large Portfolio loan closing. HUD borrowers can now take on more debt within this timeframe without triggering additional credit reviews,” said Sampada D’Silva, Chief Credit Officer for HUD lending at Greystone, in a news release commenting on the changes.
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