60 Seconds with Swett: HUD’s Express Lane and M&A

We’re not used to sensible reforms coming out of Washington, D.C., but HUD has just come out with a new “Express Lane” for the Section 232 Residential Care Facilities program. Obviously, we don’t want any facilities or borrowers that shouldn’t receive a loan to slip through the cracks, not that you can always predict a future disaster. But so many HUD loan processes sought by repeat-borrowers are a foregone conclusion, and we think with the guardrails in place, this is a great idea.

Those guardrails apply to the loan terms, the facility quality and the borrower itself. Also, all of the criteria have to be met to qualify. Some of the highlights include a maximum 70% loan-to-value, minimum debt service coverage of 2.0x for skilled nursing and 1.6x for non-skilled nursing on unadjusted, trailing 12-month NOI, certain quality standards, no borrower history of FHA insurance claims or defaults, the same operator in place for at least two years prior to application, and the ability to have a firm commitment decision immediately upon submittal. Prior FHA program experience is not required, but we imagine this Express Lane of America will mostly be used by repeat-borrowers. And if you satisfy everything, HUD will prioritize your application in the queue, which could be just a matter of weeks.

If you’re curious how this new development could impact the M&A market and the lending environment in general, then it’s great timing to tune into our webinar next Thursday called The Lenders Roundtable: A Capital Markets Update, sponsored by LTC Properties. It’s free for all to join, and attendees can also have their questions answered by our expert panelists. So, register today and see you then.