The SeniorCare Investor: HUD Has Record Year In Senior Care -
232 Loan Volume In 2012 Was Double That In 2010
There is nothing like a financial crisis to drive commercial lenders away from the market and allow others to fill the void. Most market participants are too young to remember the days when HUD was the lender of last resort, the dregs of the industry were “forced” to wait for months and months to get their loans processed. Well, the reality was that yes, some of the lower quality borrowers were excluded from some of the traditional lending markets and went the HUD route, but some very sophisticated borrowers had been using HUD for many years, primarily because even back then, it was hard to beat the terms. You just had to be patient.
But then along came the HUD LEAN program a few years ago, and everything began to change, although we think even HUD underestimated what would happen to the demand for its senior care lending product. In fact, our HUD LEAN audio conference, which was proposed to us by Lancaster Pollard (more on them later) and had record attendance (and attendee questions) in May 2009, had to go into overtime to deal with all the audience questions. And at the time, we thought the topic would be a big snooze. Big miscalculation on our part, as it turned out to be one of the more dynamic topics we have presented. Who would have thought?
In an odd sort of way, the HUD LEAN product was designed to shorten the length of time it took to process the HUD 232 loans, but because demand soared, it actually started to take even longer in some cases, because the HUD offices were a bit overwhelmed until they were able to hire more staff and not only work through the queue, but divide the queue into different groups to move the “no-brainers” along faster. Today, the queue is negligible, and while it may still take longer than a balance sheet commercial lender, the kinks seem to have been worked out, which may help explain why the loan volume has gone through the roof, not to mention that with interest rates below 3% for debt maturities of 30 or more years, it is a financing cost that can’t be beat. And the real good news is that it is a profit center for the U.S Government, although we are not sure the current resident at 1600 Pennsylvania Avenue would like to admit that.
So what has happened since that May 2009 audio conference? HUD 232 loan volume in the government’s fiscal year (which ends September 30) 2010 was $2.542 billion, and then jumped by 29% to $3.288 billion in fiscal 2011. While that may be a significant increase, it doesn’t compare to what happened this fiscal year, when HUD 232 loan volume surged another 66% to $5.471 billion. To put these numbers into perspective, Fannie Mae and Freddie Mac combined completed about $2.1 billion in seniors housing loans in calendar year 2011, which excludes affordable seniors housing, which is tracked separately (2012 numbers won’t be available for a few months, as they do not operate on the government’s fiscal year). And Fannie and Freddie are often the market of choice for seniors housing borrowers. This just shows how the HUD program has taken off............Want to read more? Click here for a free trial to The SeniorCare Investor and download the current issue today