HUD grows

HUD just made things a little easier for owners of seniors housing and care properties to refinance through the HUD LEAN program. There were a couple of notable changes to the program. First, when facilitating a partner-buyout on a property and the borrower takes out a bridge loan to finance it, they can refinance that loan immediately with HUD, with certain caveats, including timelines for buyback provisions. The second notable change is a new system for determining debt seasoning. If a HUD loan is less than or equal to 60% loan-to-value (LTV), then there is no debt seasoning requirement. Between 60% LTV and 70%, there is no seasoning required as long as at least 50%of the existing bridge loan debt was used for the project purposes. For all loans above 70% LTV (which happens to be the majority of HUD transactions), the standard two years of seasoning is still required, and there are, of course, a number of other considerations for any potential HUD loan. New construction debt still requires a three-year waiting period from Certificate of Occupancy, but if you wanted to take our your construction loan two years from CO and take out a bridge loan (with the above requirements), you can refinance that after just a year, instead of the two-year seasoning period. These new rules may attract higher-quality operators with lower leverage to HUD, as well as prompt a number of more buy-outs and cash-outs in the coming years. We will find out in the Financing News pages of The SeniorCare Investor.