When Asking for Money, Senior Housing and Healthcare Borrowers Must be Prepared to Provide Needed Information, Expert Suggests

CHICAGO, IL--In a tight credit market, it’s inevitable that lenders will sometimes be forced to give borrowers news they’d rather not hear.

For example, no one wants to hear that capital sources they have been able to rely on in the past are no longer an option. Or that lenders have tightened underwriting standards and are now offering less on the appraised value of the property.

Another type of bad news borrowers may receive is that their lender will need even more descriptive information and data than already has been provided.

Cambridge Realty Capital Companies Senior Vice President Sampada D’silva (top right photo) says 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.

Cambridge is one of the nation’s leading senior housing/healthcare lenders, with more than $3 billion in closed transactions over the past 15 years. The company has consistently ranked among the nation’s leading FHA-approved HUD lenders.

In the current cycle, popular HUD 232 financing 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 FHA-approved HUD lender initially, and later by HUD during the application approval process.

With HUD struggling to keep pace with a tsunami 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 most timely way possible, she said.

Contact:

Evan Washington

Phone: (312) 521-7604

Fax: (312) 357-1611

E-Mail:  ew@cambridgecap.com