Lancaster Pollard helps health care, senior living, affordable housing and private education organizations expand and improve their services by providing financial advice and financing solutions. Lancaster Pollard’s services enable hospitals, assisted living facilities, nursing homes, rural housing properties and private schools to develop the financial plans and secure the funding necessary to continue to serve their communities and lets them focus on what’s truly important –their residents, their patients, and their students.
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Home > News > NOFA - Sec. 538

Preserving America's Affordable Housing

How Does It Work?
The January 2006 NOFA authorizes Rural Development to subordinate existing Sec. 515 loans to the new Sec. 538 loans. In addition, interest assistance reduces the interest rate on the Sec. 538 loan to the Applicable Federal Rate (AFR), less than 5% at present. Furthermore, Rural Development will permit a rent increase in some markets and consider deferral of existing Sec. 515 payments in some situations to provide the necessary income to make payments on the new Sec. 538 debt. Other options may be available to individual owners depending on their financial situations.

Improved Benefits for EXISTING Owners:

Improved Benefits for NEW Owners:

  No Change In Ownership

   Minimize Agency Oversight
  Reamortize Loan

  Match Market-Rate Rents

  Opportunity to Improve Interest Rate

  Preserve Existing Rental Assistance

  Defer Payment

  Maintain “Old and Cold” Debt

Reviewing Options
This new funding source will not work for every property or every owner, but it is an opportunity for many owners to revitalize and rehabilitate. The process will involve a new-use restriction on properties applying the funding source, and these properties will make payments on an additional loan with an annual guarantee fee. Conventional lenders will make and service the Sec. 538 loans.  

Sec. 538 can be used in conjunction with a wide variety of funding sources - such as LIHTCs and soft loans - to accumulate repair funds.

Prepare and Act
The NOFA will have an approximate total funding limit of $100 million. This means that a limited number of borrowers will be able to take advantage of the 538 program this year, so action is critical in the first quarter of 2006.

Contact Lancaster Pollard to arrange a prompt, thorough review of your current portfolio, and determine your Sec. 538 options today.