CHICAGO, IL--Now that the dynamic administrative changes that have streamlined the way that HUD processes FHA-insured healthcare loan applications under its Section 232 funding program are effectively in place, the federal agency has begun to focus more thoughtfully on what happens after loans are closed and money changes hands.
“In the past, asset management appeared to be little more than an afterthought. However, now that responsibility for managing the HUD 232 program has shifted to the FHA’s Office of Insured Health Care Facilities (OIHCF), the agency is moving rapidly to change this perception,” funding expert Jeffrey A. Davis (top right photo) observes.
Davis is Chairman of Chicago-based Cambridge Realty Capital Companies, one of the nation’s leading senior housing/healthcare lenders with more than 300 closed transactions totaling more than $2.75 billion since the mid-1990s. Over the past 10 years the company has consistently ranked among the top HUD 232 healthcare lenders in the country.
He points out that FHA has adopted the Toyota Motor Corp.’s highly touted Lean management process to simplify and reduce the time it takes to review and process HUD applications. The administrative shift to OIHCF created a unified single source for program and policy development and a more consistent and user-friendly platform for borrowers and lenders.
“Now OIHCF is rolling out new criteria and establishing new matrices to better manage and monitor the existing loans on their books. The emphasis is on closely monitoring loan assets so problems are identified earlier or avoided altogether,” he said.
A report issued by the agency notes that the asset management function for the HUD 232 program has historically relied on physical paper files. The emphasis has been geared toward regulatory enforcement rather than loss minimization, and little training, guidance or support was provided to the individual asset manager.
All this changes with a 232 program that offers sophisticated electronic systems for tracking asset management files and monitoring program activities. Moving forward, Davis believes the situation dramatically improves, as OIHCF utilizes Lean production philosophy and techniques in concert with quality assurance criteria established by former U.S. Commerce Secretary Malcolm Baldridge (middle left photo) and enacted into law as the Malcolm Baldridge National Quality Improvement Act of 1987.
“The Baldridge criteria created the impetus for a new public-private partnership based on strategic planning and the establishment of viable quality improvement programs to strengthen the nation’s competitive posture and leadership role. OIHCF has made it clear that the criteria for performance excellence envisioned by
Baldridge and improved upon by others will be utilized as part of its ongoing efforts to make meaningful improvements in the way assets are managed for the healthcare funding program,“ he said. Davis said OIHCF acknowledges that the Lean development and asset management effort greatly depends upon responsible participation by lenders. Account executives are being assigned to lenders with responsibility for development pipeline management, quality assurance, and monitoring and asset management for the lenders’ portfolios.
The account executive’s role is not to underwrite loans but to effectively function as the lender’s advocate and as a quality control officer.
“The changes are important to borrowers because, at the end of the day, everyone involved with the HUD 232 process is a stakeholder in its success. Difficulties arise when loans are not actively monitored.
“From the borrower’s perspective, the changes will mean more active submission of operating financial statements and clinical records, and more frequent visits by consultants representing the lender. For lenders, changes involve learning to apply a new discipline as they become much more involved in the loans they create,” he said.
Contact: Evan Washington, Phone: (312) 521-7603, Fax: (312) 357-1611, E-Mail: ew@cambridgecap.com
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