It happens in the best of times. A highly motivated senior housing/healthcare lender is anxious to get something done but finds they must give the borrower news they’d rather not hear.
“Finding capital for senior care projects is a lot less problematic today than it was a few years ago. But a program the borrower has relied upon in the past may no longer be an option. Or the lender may have tightened underwriting standards and is now offering less on the appraised value of the property,” says Cambridge Realty Capital Companies Managing Director Anthony Marino.
“The other type of bad news borrowers may receive is that the lender is going to need even more descriptive information and data than what has already been provided,” he said.
Cambridge is one of the nation’s leading senior housing/healthcare lenders, with more than $6.5 billion in closed transactions over the past 20 years. The company has consistently ranked among the nation’s top FHA-approved HUD 232 lenders.
Mr. Marino says borrowers seeking financing in today’s capital markets must still be prepared to thoroughly explain their business plans and motives. The need lenders have for information can seem insatiable at times.
This especially applies to popular HUD financing. With these loans there effectively is a two-tiered underwriting process – initially by the FHA approved lender, and later by HUD as the application process unfolds.
For the HUD lender, the primary underwriting concerns are historical cash flow and occupancy. Typically, 12 months of trailing financials are needed, and occupancy must be at standards acceptable to HUD.
Up until the time the application is submitted, financial and occupancy data must be monitored and updated, with the most recent 12 months of numbers needed to support the loan request.
Mr. Marino says a debt coverage ratio for the property should be met. And there should be an upward trend for these numbers as well as for occupancy.
If a state survey shows any deficiencies, a plan of correction must be submitted. And proof of insurance that meets HUD standards must also be provided.
“The process may seem daunting but actually moves along nicely when working with an approved HUD lender who has done this many times before,” he added.