What are the chances that HUD 232 loans for senior housing/healthcare borrowers will evolve into a commoditized funding product anytime soon?
“Not very good,” says funding expert Jeffrey A. Davis.
“HUD has made remarkable progress in streamlining the process and making HUD loans more accessible to borrowers. But the program doesn’t lend itself to a cookie-cutter approach,” he says.
Mr. Davis is Chairman of Cambridge Realty Capital Companies, one of the nation’s leading senior housing/healthcare lenders. Since the 1990s the company has closed more than 450 senior care loans and has consistently ranked among the nation’s leading FHA-approved HUD lenders.
“FHA-approved lenders are expected to pre-qualify high quality borrowers who will not default on their loans. Product knowledge and awareness of comprehensive agency guidelines are a prerequisite for those who process these loans,” he said.
If anything, underwriting standards have become even more demanding in the current cycle, Mr. Davis suggests.
Mr. Davis points out that HUD is not a lender but a guarantor. The FHA-approved lender obtains a commitment of mortgage insurance from HUD, which effectively guarantees that the U.S. government will make payments on the loan if the borrower defaults.
“Effectively, the approved HUD lender does the heavy lifting. The HUD lender collects payments, manages reserves and escrow funds, and provides assistance and guidance to help borrowers obtain the best outcome possible in their specific situations. This can include assistance with HUD inspection reports, audits, claims on reserves, payoff letters and the like,” he said, adding:
“Obtaining HUD financing remains a complex three-part process. Knowledge, experience and financial acumen are required every step of the way.”