If it is your expectation that the lender you chose to handle your HUD Section 232 loan will be all things to all parties involved in the transaction, your thinking is going in the right direction.
“In these transactions, there’s no end to the assistance the HUD lender is called upon to provide. The lender becomes the eyes and ears of the borrower and the communicator of all the agency requests that must be complied with in order to get the loan the borrower is expecting,” says Cambridge Realty Capital Companies Chairman Jeffrey A. Davis.
Cambridge is one of the nation’s leading senior housing/healthcare lenders and, in the current century, has consistently ranked among the top FHA-approved HUD lenders in the country. Like everything else, the HUD Lean program continues to change with the times, Mr. Davis said.
“Today, HUD is very active in financing skilled nursing homes and, to a lesser extent, assisted living buildings. There have been many favorable changes in the program. For example, in a relatively new development, the agency now provides cash out for deals that present with a 70 percent loan-to-value ratio,” he said.
There are a number of requirements borrowers must meet before applying for a HUD loan.
“In short summary, the senior housing facility must be licensed and the agency is primarily focused on stabilized facilities. Major loan requirements are an 80 percent loan-to-value disbursement and strong 12-month trailing revenue,” he noted.
Mr. Davis says Cambridge regularly fields borrower questions about a number of different things, such as when to lock in an interest rate, how long it will take to close the loan, what the costs will be, and where the capital to fund the loan is coming from.
Interest rates typically lock just prior to or at commitment. Once all the documentation is received from the borrower, and the application submitted, a HUD loan typically closes in approximately 120 to 150 days.
Normal costs are part of the HUD process and include an appraisal and feasibility study, third-party reports, environmental and engineering reports and the payment of an application fee. Cambridge issues GinnieMae mortgage-backed securities to fund HUD loans.
Mr. Davis says borrowers seeking to refinance an existing HUD loan often ask if it makes sense to refinance when a prepayment penalty on the existing loan exists.
“There are many circumstances where it makes sense to pay a prepayment penalty, most revolving around interest rate projections. Cambridge always recommends that a payback calculation be done so the borrower knows exactly how long it will take to pay back the prepayment penalty and when the reduced rate will be accruing directly and specifically to the borrower,” he said.