The COVID-19 pandemic changed many things when it was first declared in early 2020, not the least of which is the way the world conducts business. Shifting from in-person to virtual exchanges was the first of many adjustments for businesses. Cambridge President Jeffrey Davis noted that much of Cambridge’s focus shifted toward products that became more relevant to pandemic times, specifically the IRR (Interest Rate Reduction) loan program.
An IRR loan allows loan holders to reduce their current rate of interest in the event that the overall interest rates drops. “That’s exactly what happened when the pandemic hit,” said Davis. The most drastic drop occurred between February and March of 2020, with rates rising again in June 2020, then remaining relatively stable until the end of the year.
As soon as interest rates started to plunge, Cambridge began examining its clients’ portfolios to see which of its loan holders qualified for and could benefit from an IRR loan. Cambridge Senior Managing Director Sampada D’silva led the charge on proactively reaching out to Cambridge’s borrowers to inform them of the benefits of the IRR program. “For many, the potential to reduce the rate of their existing loans had not even been on their radar until we contacted them,” D’silva stated. That was no surprise, as all of Cambridge’s operators were under tremendous stress in the early months of the pandemic. Coping with rampant facility outbreaks, staff shortages due to illness, the scramble to acquire proper PPE, and the near daily changes in information and Covid protocol, their loans were not foremost in operators’ minds.
Almost everyone D’silva spoke to expressed immediate interest in the IRR program, and gratitude and relief when the savings in interest payments became apparent. As for the paperwork involved, IRR borrowers reported that minimal involvement on their parts was required, allowing them to continue to focus their attention on the ever-changing demands of operations.
All in all, Cambridge completed approximately 46 IRR loans beginning in March 2020 and ending in December 2020. Most importantly, Cambridge loans on its $441,000,000 IRR portfolio from late March 2020 to December 2020 have reduced interest rates ranging from a low of 5.5% of the outstanding loan balance to a high of 22% of the outstanding loan balance. “Cambridge has been working nonstop to date to take advantage of different HUD programs,” Davis stated, “and has received multiple compliments from our borrowers about how helpful the HUD IRR program is.”
Although rates have risen since the initial drop at the beginning of the pandemic, Davis pointed out that they are still very attractive, with plenty of incentive for current borrowers to consider an IRR loan. The Federal Reserve maintained its federal funds rate target at its April 2021 meeting as it stated it would, so drastic fluctuations are not expected in the near future.
“I don’t think anyone expected to still be in the thick of this a full year later,” Davis commented. While millions of Americans have now been vaccinated, the newest COVID-19 variants are creating new problems while perpetuating some old ones. “We are not out of this yet, and it will continue to affect the way we do business for some time,” Davis iterated. With so many unknowns still present, Davis urges borrowers to consider the money-saving potential of an IRR loan as well as a 223(a)(7) HUD loan. “Cambridge does all the heavy lifting with regard to paperwork, briefly involving the operator only at initiation and then again at closing. It’s a win-win for everyone.”
