HUD Lending Continued Through the Pandemic and Looks Strong Coming Out

Over the past month, bankers have secured multimillion dollar loans insured by the Department of Housing and Urban Development (HUD) for SNF properties in North Carolina, D.C., California and Kentucky, as the government agency continues to be one of the most reliable backers for nursing homes through the pandemic.

“Over the course of COVID we have seen tremendous opportunities to refinance loans that are already in the HUD mortgage insurance program through interest rate reduction note modifications and 223(a)(7’s),” Jason Smeck, seniors housing and health care production director at Lument, told Skilled Nursing News. “In some cases, owners have refinanced a couple of times due to plunging rates.”

HUD 232/223 (a)(7) loans refer to loans that are used to refinance an existing HUD loan, wherein the borrower can extend the term of the loan up to 12 years and increase the loan amount back to the original amount borrowed.


As the a7’s have gone up, HUD 232/223(f) loans, or refinance loans, which are used to refinance conventional loans into HUD, have gone down due to depressed occupancy rates across the industry, which obviously had a tremendous impact on performance, Michael Gehl, CIO of Housing & Healthcare Finance, explained.

“The two primary products that (HUD) offers, the a7’s versus the f’s, if you look at loan volume as calculated by new construction, refinancing of new loans or acquisition, or refinancing of existing HUD loans, you’ll see that acquisition or refinancing of existing loans is down about $1.5 billion from where it was last year,” he said. “It’s being made up with an increase of $1.3 billion in a7’s.”

The increase of a7’s has helped offset the decline of f’s, Gehl added.


“The volume of refinance loans is way down from previous years because the performance of facilities was greatly impacted by COVID. Facilities must be stabilized to qualify for f loans,” he explained.

Gehl expected f applications to HUD to go up as the industry starts to normalize again.

“I think the applications will start coming as we see that occupancy pick back up, you can now start to cancel out some of those deals from a HUD execution perspective,” Gehl said. “Those deals that might have been tabled … I think those will start coming back as we start seeing that occupancy slowly return.”

Capital Funding Group announced it financed more than $2 billion over the first half of the year for their long-term care and assisted living industry clients, which included 34 bridge loans and 50 HUD loans.

Of the $2 billion, nearly $1 billion was financed in June alone, making it the most successful funding month CFG has ever reported. Included in the deals was a $660 million bridge-to-HUD loan, representing the single largest financing deal the CFG has executed in 10 years.

CFG also executed a $55.5 million bridge loan for three facilities in Illinois with a combined 609 beds, a $33 million bridge loan for a 266-bed facility in Florida along with a $22.9 million bridge loan for the acquisition of two facilities, with 342 beds combined, in Kentucky and Tennessee.

“I have only the utmost compliment for HUD because, unlike other lenders, HUD reached out at the beginning of the pandemic and wanted to continue to lend money to and continue to ensure loans that are made into the nursing home industry,” Jack Dwyer, CFG Chairman and Owner, told SNN.

He said HUD used a provision in the Housing Act, section 223(d), which broadened the scope of the program so that anyone with an existing HUD-insured loan could borrow one year worth of debt service, reserve taxes, insurance, and more, so they wouldn’t have to make their payment for over a year.

“HUD continues to make loans, unlike the banking industry that went to the sidelines and dropped out,” Dwyer said. “As far as I’m concerned, you have to stick with your customers through thick and thin.”

He suggested that SNF operators with an existing HUD mortgage, look to section 223(d) for a little more “breathing room.”

Anybody that doesn’t have an existing HUD-insured loan should go back and ask themselves what their current lender is doing for them, he added. 

“Nothing. So why would I not refinance my existing loan and convert it to a HUD-insured loan,” Dwyer said. “When the chips are down, this government agency stood by us, unlike your commercial banker who abandoned us during the pandemic.”

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