When the FHA loan (which later became the “HUD” loan) was first created, it was designed with a two-fold mission: to put American families into their own homes, and to stimulate a near-stagnant construction industry. Today, the HUD loan is still associated with that original mission.
However, over the last three decades, “the HUD loan has become increasingly popular for financing senior living facilities, particularly those offering moderate to high levels of medical care services,” notes Cambridge Realty Capital Chairman Jeffrey Davis. Although the demographic that the HUD loan serves looks different than it did in its beginning, it is still fulfilling its original mission: to provide adequate housing for Americans and to stimulate the construction industry. It’s a win-win situation.
What are the HUD advantages for high acuity senior care providers? “HUD is still providing loans for single and multi-family housing,” Davis remarks. “However, there are tremendous benefits for facilities providing living accommodations and medical care services to seniors.” This includes skilled nursing homes, licensed assisted living or board and care buildings, licensed memory care and acute-care hospitals.
Some of those benefits are:
- Long-term and fixed-rate loans
- Appealing pre-payment options
- Amortization and terms of 30 years
- No personal recourse to principals
- Complete coverage of healthcare landscape
- Financing can be made available before ground is even broken
Additionally, it offers distinctive financing programs:
Section 232/223(f): For purchasing, refinancing or rehabilitating existing facilities or the construction of new facilities, or any combination of any of these needs
Section 223(a)(7): For refinancing of facilities that already have FHA-insured projects
Why Cambridge? Cambridge started out as a provider of financing for commercial real estate in general. Several years into its existence, Cambridge brought in a new discipline and a team who had extensive experience working with HUD and the senior care sector.
Cambridge began to cultivate a subspecialty in HUD financing for senior living. Today, Cambridge still provides conventional loans, but has developed a reputation as a premier HUD lender.
What many borrowers don’t realize is that HUD loans have very significant, different looks and feels depending on who the HUD lender is. Cambridge has become so well-versed in HUD lending that it eventually split into two groups: one for conventional loans, and one whose sole focus is HUD lending, originally beginning with multi-family taxable and tax-exempt transactions and then focusing primarily on senior housing and healthcare.
“The HUD group is essentially left to solely focus on HUD transactions,” Davis says. This includes:
- HUD underwriting
- Prescreening HUD transactions
- Processing HUD applications and satisfying all initial underwriting concerns
- Interpreting HUD feedback and language
- Submitting applications to HUD
- Permanent loan servicing
- Construction loan servicing
- Asset management
“The HUD team never has to work on a conventional loan, do originations or interface with borrowers until they are ready to process a HUD loan,” Davis adds. “They are able to spend 100% of their time with HUD and focus on their ‘one thing.’ Team members do the tasks that they do best and work on deals that can get done.”
Cambridge’s track record and history of success has resulted in a long line of happy borrowers. “Even borrowers who came to Cambridge saying ‘I never want to do a HUD loan again’ leave saying ‘I’d like to do more HUD loans and every one of them will be with Cambridge.”