The golden age of HUD LEAN lending is over, for now, as transaction and dollar volume in the agency’s fiscal year 2022 fell by 32% and 35%, respectively, from their FY2021 firm commitments. FY2021 was the peak, with $4.88 billion in firm commitments across 426 transactions, up from $4.08 billion and 335 transactions, respectively, in FY2020. But now, dollar volume dropped to $3.3 billion across 279 transactions in FY2022, which represents the lowest dollar volume since FY2016 ($2.84 billion) and lowest transaction total in recent memory. And this most recent fiscal year includes nearly two full quarters when interest rates were still near zero. We know that interest rates are still low, historically, but there is no rush to refinance now, and there certainly is no rush to close a loan modification.
Just like the last two years, Greystone topped the list of HUD lenders with 35 transactions and a total of $418.6 million of initial endorsements. By comparison, last year the firm closed $888.9 million across 71 transactions, but we are in a different world now. Newpoint Real Estate Capital took second place in terms of dollars, with $388.9 million of initial endorsements across 28 transactions. But VIUM Capital/Merchants Capital Corp. closed the second-highest amount of transactions, with 30 deals for $377.15 million in dollar volume.
White Oak Healthcare Finance worked on 18 transactions for $270.3 million in volume in FY2022, which takes fourth place in terms of dollars. Meanwhile, Capital Funding rounded out the top-five with $233.3 million across 21 loans. First American Capital Group and Orix Real Estate Capital closed an impressive volume in FY2022, with $196.7 million (nine deals) and $164.6 million (13 deals), respectively, of loans.
A couple other active lenders included Walker & Dunlop with 18 transactions and $195.4 million of volume and PGIM Real Estate with $56.5 million of volume across 20 deals. Berkadia also had a solid year with 16 deals and $93.45 million of volume, and KeyBank closed $103 million of volume across 10 deals.
Looking at future volume, HUD will continue to be the lender of choice when it comes to permanent, fixed-rate debt, and as more facilities reach and hold stabilization after the pandemic, more will qualify and seek it out, despite the higher rates. A lot of variable rate debt used to fuel the M&A boom of 2019, 2021 and 2022 will need to be taken out, keeping HUD lenders active in 2023 and especially busy in 2024 when rates are hopefully on the decline.
