Judge Approves $1M Penalty in Record-Setting HUD Skilled Nursing Default

An administrative law judge approved a nearly $1 million penalty against the owner of an Illinois nursing home chain responsible for the worst default in the history of the Department of Housing and Urban Development’s loan program for health care facilities, the New York Times reported on Friday.

Under the terms of the deal, Zvi Feiner must pay about $965,000 to resolve accusations that he failed to file three years’ of paperwork associated with HUD-backed mortgages on the Rosewood Care Centers. Feiner — a rabbi based in Skokie, Ill. — and associates owned the company, which last year defaulted on $146 million in loans, according to the Times.

The federal government, which has been responsible for the facilities through a receiver, has located a buyer for the properties, though representatives for HUD declined to name the potential new owners to the Times.

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The paper first reported on the default in June, using the record-setting failure to question the overall health of HUD’s 232 program, which allows owners of skilled nursing facilities and other institutional sites of care to receive long-term purchase or refinance loans at low rates. The government responded by noting that HUD-backed nursing home loans have a default rate under 1%, while lenders that specialize in the products emphasized that they represent a crucial source of funding for health care facilities in an industry struggling with low reimbursements and high costs.

“The program is essential for nursing homes to function,” Adam Offman, managing director in lender Dwight Capital’s health care finance operation, told SNN back in June. “I don’t know of any other source for permanent financing other than HUD for skilled nursing facilities.”

Feiner’s lawyer told the Times that he was “appreciative” to reach the settlement, though he also faces unpaid vendor bills of up to $20 million and dozens of personal injury lawsuits.

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