An executive in the senior housing lending business is warning potential borrowers that because of the tight credit markets, they must be prepared to give even more descriptive information and data than already has been provided.
Sampada D'silva, a senior vice president at Cambridge Realty Capital Cos., explained that borrowers seeking capital in today's marketplace must be prepared to thoroughly explain their business plans and motives. The need lenders have for information may seem insatiable at times.
In the current cycle, the Department of Housing And Urban Development's 232 program has emerged as the lending product of choice for senior housing/healthcare borrowers. With these loans there is effectively a two-tiered underwriting process—by the Federal Housing Administration-approved HUD lender initially, and later by HUD during the application approval process.
With HUD struggling to keep pace with the large volume of loan applications, the timetable for processing loans has slipped, which exacerbates the underwriter's need to move forward with current information, D'silva said.
For the lender, the primary underwriting concerns are the historical cash flow of a facility and occupancy. Typically, 12 months of trailing financials are needed, and occupancy must be at acceptable standards defined by HUD.
Up until the time the application is submitted, financial and occupancy data must be monitored and updated with the most recent trailing 12 months numbers to support the loan request.
D'silva says a debt service coverage ratio for the property should be met. And there should be an upward trend for these numbers as well as for occupancy.
If a state survey result shows any deficiencies, a plan of correction must be submitted. Proof of insurance that meets HUD standards must also be presented.
To guide borrowers, some lenders post a checklist of documents needed by underwriters. It is important to submit the requested information in the timeliest way possible, she said.
