HUD refinance and acquisition loans for assisted living and nursing homes now have an option to get a commitment sooner. A recent announcement by the Federal Housing Administration regarding its new “Express Lane” option for residential care 232 HUD loan applications is welcome news for both borrowers and lenders, says Cambridge Realty Capital Vice President Zachary Scardina. “This new program means that low risk transactions with certain metrics can access funding more expediently than ever before.”
Prioritized processing for Section 232/223(f) refinance and acquisition applicants deemed to be low-risk is now available. Historically, HUD loan applications have been processed in a “first-come, first-served” order. Awaiting an underwriter at HUD can take weeks to months (the “queue”) and, in the past, there was nothing an applicant could do to speed up the process. “Essentially, the Express Lane program allows for pre-screening of applicants, moving those who meet the Express Lane program criteria to the front of the queue,” stated Sardinia.
To be eligible for this expedited process, applicants must meet the following criteria:
- Have a maximum of 70% loan to value.
- Have a minimum debt service coverage ratio using unadjusted trailing 12-month net operating income (including the underwritten reserve for replacement deposit) of:
- 2.0x for the skilled nursing facility portion of the facility and
- 1.6x for the non-skilled nursing facility portion of the facility.
- All identified controlling participants must have no history of FHA insurance claims or defaults (60+ days late) on FHA-insured loans. (Prior FHA program experience is not required.)
- Not more than 20% of the facility’s revenue can be attributed to a special use.
- The Operator must have been in place at the facility for two or more years prior to the application submission. This refers to the owner in non-lease situations, and the lessee in lease situations.
- The mortgage amount must not exceed $70 million for the greater New York City area (i.e. five county-level administrative divisions/boroughs: The Bronx, Brooklyn, Manhattan, Queens, and Staten Island plus Long Island and Westchester County), or $50 million for any other area.
“Once a lender determines that an application meets all of the relevant criteria, it can request Express Lane processing,” Scardina explained. Any applications not fulfilling the criteria will be placed in the regular 223(f) processing queue based upon the application submittal date. “This new program will reduce the overall waiting time for qualified 232/223(f) HUD applicants and make HUD funding more appealing than ever,” Scardina finished.
