The Federal Housing Administration (FHA) recently introduced changes to improve the efficiency of its Department of Housing and Urban Development Section 232 program. FHA anticipates that these modifications will streamline the submission requirements and HUD processing procedures to allow for a smoother and faster process.

These changes could be critical to senior living borrowers who need to access capital for renovation or new construction, especially given the difficulty health care borrowers can face in today’s tight credit markets and the fact that HUD loans provide very competitive interest rates. HUD loans historically have turned off many borrowers because of processing times.

The changes to the 232 program include:

• Only a few dedicated program centers will process HUD/FHA Section 232 applications. All new applications will be submitted and processed electronically, eliminating past redundancies.
• The number of processing steps is being reduced from 57 to 16. HUD expects this to reduce the entire loan process from application through closing to only 60 days.

Lancaster Pollard is following these developments and will post additional resource material as it becomes available. Learn more about the 232 program here (some elements may be subject to change. Please check back next week for updates, or contact Lancaster Pollard if you have any questions).

Fiscal year 2007 was the most productive ever for refinancing and preserving Section 202 affordable senior housing properties, according to Department of Housing and Urban Development data. 

While the 1980s brought a construction boom, the latest evolution of the loan program has been a focus on preservation, impelled by November 2004 underwriting changes that made refinancing a viable way to inject capital into properties. In HUD fiscal year 2005, 49 Section 202 properties were refinanced. Fiscal year 2006 brought 249 refinances. In 2007, 294 were completed.

“Properties have been paying on interest rates as high as 9.25 percent, and this continuing period of low interest rates has created an opportune environment to preserve a large amount of inventory,” Brian Pollard, president of Lancaster Pollard Mortgage Company, said. “Millions of dollars in new money have been acquired to make repairs and help properties nationwide strengthen their financial health. We’re excited to be such a strong contributor to this preservation movement.”

Lancaster Pollard Mortgage Company refinanced more Section 202 direct loans in FY07 than any other firm in the country, according to HUD data. The firm has worked on transactions in 29 states. “We have helped properties of all sizes with various financial goals improve their finances and their facilities,” Pollard said. “Tax credits, HUD programs, and tax-exempt bonds have been used individually and in combination to achieve the greatest benefit. We see refinancing remaining an excellent preservation option for the foreseeable future.”

With fiscal year 2007 on track to be the most productive ever for refinancing and preserving Section 202 affordable senior housing properties, the American Association of Homes and Services for the Aging and Lancaster Pollard have published a guide explaining the many financing options and offering several case studies. Authored by Brian Pollard and Nicholas M. Gesue, senior managing director and senior vice president of Lancaster Pollard, the guide includes:

• An overview of the evolution of the Department of Housing and Urban Development’s Section 202 direct loan program for affordable senior housing.
• Explanation of the various options available to inject capital into aging properties
• Several case studies illustrating the processes and outcomes of AAHSA member properties that refinanced using federal programs, tax credits and other tools.

While the 1980s brought a Section 202 construction boom, the latest evolution of the loan program has been a focus on preservation, impelled by underwriting changes that made refinancing a viable way to inject capital into properties. In HUD fiscal year 2005, 49 Section 202 properties were refinanced. Fiscal year 2006 brought 249 refinances. As of the March 31 midpoint of 2007, 176 had been completed.

 “Millions of dollars in new money have been acquired to make repairs and help properties nationwide strengthen their financial health,” Pollard said. “Tax credits, HUD programs, and tax-exempt bonds have been used individually and in combination to achieve the greatest benefit. We see refinancing remaining an excellent preservation option for the foreseeable future.” Lancaster Pollard is, according to HUD data from 2005 through the first half of fiscal year 2007, the nation’s No. 1 refinancier of Section 202 direct loans. “Refinancing Section 202 Affordable Senior Housing” is available for download here.

Additionally, the Department of Housing and Urban Development has published a two-volume work on preserving affordable housing. It serves as a guide to regulations and resources at the state, local, and federal levels, offering advice for overcoming barriers along the way. The best practices publication, according to HUD, was "designed to address the challenges to rehab at its development, construction, and occupancy stages."

A PDF of HUD's "Best Practices for Effecting the Preservation of Affordable Housing" can be downloaded here. It and other guides are available under Lancaster Pollard's Resources page.

Lancaster Pollard has created a financing strategy that lets senior living owners extract equity or attain greater financial leverage when acquiring or refinancing stabilized long-term care facilities. The debt financing and financial advisory firm formally introduced EquityTap™ at the American Health Care Association’s Finance Forum Oct. 8 and 9 in coordination with the annual AHCA conference in Boston.

EquityTap is a proprietary program that provides exceptional financial leverage at an attractive cost of capital. Loan proceeds can be used for virtually any purpose, allowing borrowers to extract considerable equity while retaining all benefits of ownership. Lancaster Pollard specializes in helping long-term care providers expand and improve services by financing construction, expansion and renovation projects. HUD data ranks Lancaster Pollard as the No. 2 FHA/HUD MAP lender for fiscal year 2007.

“Owners of long-term care facilities need access to the right tools to accomplish their financial objectives,” Lancaster Pollard President Brian Pollard said. “EquityTap is a great choice for owners needing non-recourse financing with little administrative burden and a short transaction time.”

To discuss EquityTap and other options with Lancaster Pollard, call (866) 611-6555.

The US Department of Health and Human Services' Health Resources and Services Administration has recently released "The Critical Access Prototype Facility Study." The study's objective is to assist critical access hospitals in providing modern health care delivery, which has changed substantially since the inpatient-based model of the Hill-Burton years.

According to the study, experience has shown that refurbishing and updating existing hospitals can result in significant compromises and can actually exceed the cost of building a replacement hospital; therefore the prototype focuses on planning schemes for 15-and 25-bed replacement hospitals. The study also provides detailed recommendations on departmental space allotment, which could be useful to a hospital in assessing the size and strength of its own departments, regardless of that hospital's number of beds or capital improvement plans.

We think the prototype's greatest value is as a catalyst for change. Lancaster Pollard can help by providing a similar assessment of a hospital's ability to access funds. We are experienced in every hospital funding option, and have a proven record of closing projects for the lowest cost of capital available.

The Resources section of our website is an excellent source of information on hospital funding options. Browse through it for case studies, white papers, and other helpful reading material.

Click here for a direct link to the full CAH Prototype Study.
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Lancaster Pollard is proud to announce that Chief Executive Officer Thomas R. Green and Senior Managing Director Brian Pollard won the south central Ohio region’s 2006 Ernst & Young Entrepreneur of the Year Award in the services category. The firm credits its performance to its committed associates, its dedication to educating clients and its foresight to constantly adapt and add new capabilities to serve industries whose needs change as the population ages and the pace of technology quickens.

The Entrepreneur of the Year Awards recognize outstanding entrepreneurs who are building and leading dynamic and growing businesses. The program honors entrepreneurs through regional, national and global award programs in 35 countries.

A provider of financial advice and capital funding solutions to the health care, senior living, affordable housing and private education sectors, Lancaster Pollard doubled the size of its Columbus headquarters last year. In the past five years it has opened offices in Georgia, Kansas, Colorado and, in May, Texas.

“Lancaster Pollard is growing, and growing fast, in a sector where the competition comes from large national corporations, but the most desperate needs for financing come from smaller nonprofit organizations,” Chief Executive Officer Thomas R. Green said. “Our success is a direct result of our clients’ confidence and trust in us, and this recognition is very gratifying in that it evidences our strong commitment to helping those who help others. We thank all those organizations whose trust and relationships we prize above any other award.”

In the past 12 months Lancaster Pollard has:
• Obtained the first use of federal mortgage insurance to fund an Ohio hospital expansion
• Advocated for federal underwriting changes to senior affordable housing properties. The firm is working to help more than 100 affordable senior living properties refinance now that the changes have been made
• Obtained the two largest USDA loan commitments ever for Critical Access Hospitals
• Participated in pilot programs for rural affordable housing financing options