A new HUD proposal currently under review will effectively take interest rate risk out of the equation for some senior housing/healthcare borrowers looking to take cash out when refinancing senior care properties.

Historically, HUD borrowers were required to allow loans to “season” for two years before taking cash out.  Under the proposed changes, this requirement will no longer apply to borrowers who meet specific requirements spelled out by HUD, says Cambridge Realty Capital Companies Vice President Anthony Marino.

He says the proposed changes will enable borrowers to immediately refinance a property and take cash out if the loan-to-value ratio for the property is less than or equal to 60 percent.  Also, any loan-to-value that is less than or equal to 70 percent can be submitted immediately as long as the percentage of debt used for project purposes is greater than or equal to 50 percent.

Mr. Marino says the industry is cheering this development because it will allow borrowers to access equity and obtain the benefits of long-term non-recourse financing.  Owners with long-term equity in a property will be able to receive cash for capital improvements.  Others may use the cash to fund efforts to turnaround underperforming properties in a short period of time.

Mr. Marino is optimistically projecting that the rules changes will dramatically impact the number of loans processed by the HUD agency.

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