Senior Living Business Interactive: HUD LEAN: Changes and Updates (Part II)

Clearly, any new program or ramp-up of a process will have fits and starts. And while that was certainly true during the first 12-18 months of HUD LEAN, the program has gotten better and stronger every year, according to Erik Howard, Managing Director of Health-Care Real Estate at Capital Funding, LLC in Baltimore. Howard is primarily responsible for structuring and financing Red Capital’s health-care transactions.

Having dedicated staff for HUD’s senior living programs has meant that the understanding of the industry, its challenges, and its underwriting issues has grown considerably compared to the pre-LEAN days, when MAP underwriters would likely see few health-care deals in the course of a year. “We’re seeing obvious efficiencies in underwriting and processing,” Howard said. “HUD is working through applications more quickly.”

One thing that clearly helped over the last 12 months was HUD’s ability to get third-party help from contractors on some of the more rudimentary products; e.g., the A7 process, which relates to borrowers looking to refinance their existing HUD-insured mortgages to lower the interest rate. “Contractors helped HUD clear out the backlog, allowing the dedicated HUD LEAN professionals to concentrate on deals that were not plain vanilla: refis, sub-rehabs, maybe some new construction deals,” he added.
Perhaps the most welcome improvement has been the reduction in processing time—the queue—which has trended down significantly, especially over the last 12 months. By helping lenders understand what an appropriate package should look like, HUD LEAN has enabled borrowers to get through the system much more quickly.

Maintaining an open line of communication with HUD is critical to producing an effective outcome for borrowers and to ensuring that the queue remains at a manageable level. “Communication is essential in terms of ensuring a relatively smooth process and managing everyone’s expectations,” said Howard. “We try to have a dialogue as often as possible and as needed at various points along the continuum of the application’s lifecycle.” Typically, his firm targets three points of contact with HUD when processing any application: the underwriter during the actual processing, the closing coordinator when a commitment has been issued, and then the attorney.

With HUD LEAN, communication with the industry has become more open, more regular, and more focused with regard to disseminating information on proposed regulation changes and other important items and then giving lenders and borrowers an opportunity to weigh in. HUD LEAN is using e-mail blasts and its LeanThinking@hud.gov mailbox to address issues or comments from industry participants and to clarify inconsistencies.

On a more global basis, HUD holds lender conferences and Kaizens (see box) from time to time to discuss what works, what doesn’t work, and proposed changes. At those HUD Kaizens, participants discuss issues related to the LEAN program, challenges to the program, and ways to continue to make the program better and more efficient. Essentially, HUD is looking for input in order to understand issues relating to risk in order to determine the best way.........Want to read more? Click here for a free trial to Senior Living Business Interactive  and download the current issue today