On March 1, new LEAN Processing guidelines will go into effect for HUD’s Section 232 Mortgage Insurance Program, which can be used for new construction or substantial rehabilitation of senior living properties. LEAN processing will be optional (an alternative to MAP processing) until March 1, when it becomes standard.

LEAN processing will streamline the HUD review timeframe through the creation of standardized checklists, statements of work for third party work, certifications and templates for use in assembly of the application package. We believe this new system will significantly improve flexibility in financing and reduce borrowers’ wait time over the old MAP process.

The new guidelines on Section 232 LEAN Processing include:

• Pre-applications are required only for new units being added to the market, not for replacement units or rehabs
• The pre-application focuses completely on the acceptability of the market. Unlike MAP, it does not require the submission of a preliminary plan and specifications
• Pre-application requires a Market Study, Phase I Environmental report and information about the development and operation team, as well as general information about the property’s services and amenities
• The appraisal is a market appraisal, eliminating the requirement to use HUD forms and a proprietary earnings carve-out

The Section 232 LEAN Processing guidelines are in addition to LEAN guidance issued in 2008 on the Section 232/223(f) mortgage insurance program, which operators can use to access capital for a refinance with minimal to moderate repairs. Only a few dedicated program centers will process HUD/FHA Section 232/223(f) LEAN applications. All new applications will be submitted and processed electronically, eliminating past redundancies.The number of processing steps for Section 232/223(f) is being reduced from 57 to 16. HUD expects this to reduce the entire loan process from application through closing to only 60 days.

As an experienced lender in the senior living industry and one of the more active LEAN lenders within HUD, please contact Lancaster Pollard to learn more about whether LEAN processing makes sense for your new construction, renovation or refinance project.