Learn how to navigate this government program for financing senior-housing facilities

Jonathan S. Camps, senior vice president and Federal Housing Administration chief underwriter, Love Funding Corp.

As published in Scotsman Guide's Commercial Edition, July 2009.

The credit-market collapse has left mortgage brokers, real estate owners and property developers with few financing options. Funding for most commercial property types is now primarily limited to local banks and private lenders. For multifamily and health-care properties, however, U.S. Department of Housing and Urban Development (HUD)-insured financing remains a viable option.

In fact, HUD-insured lenders nationwide have seen a steady increase in business since the capital-market collapse. The federal government's guarantee behind the loans is one reason; another is the favorable loan terms various HUD-insured programs offer.

Because the agency is assumed to have a lack of consistency and inability to meet reasonable timeframes, however, widespread use of HUD-insured programs has been slow. A new program designed to finance senior-housing facilities may change that.

In July 2008, HUD introduced its LEAN program after transferring its Section 232 program from its Office of Multifamily Housing to its Office of Insured Health Care Facilities. The new program applies to any facilities that are eligible for Federal Housing Administration (FHA) mortgage insurance under HUD's Section 232, according to the department. Eligible facilities include nursing homes, intermediate-care facilities, board-and-care homes and assisted-living facilities.

Early success

The LEAN program provides a centralized manner in which HUD reviews lender applications, which in turn offers greater consistency and improved timing.

Initially, it was available only for the refinance or acquisition of existing facilities. This past December, however, HUD introduced guidelines for insuring new construction, substantial rehabilitation, Section 241(a) supplemental loans and Section 232/223(a)(7) modification loans for applicable facilities. By making the LEAN process available to all health-care-property programs, the department has followed through with its promise to transform the business model for reviewing and closing health-care applications.

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