Financing through the U.S. Department of Housing and Urban Development (HUD) has become increasingly delayed, with growing queues for prospective borrowers in the nursing home sector.

The backlog at HUD is growing as staff accept buyout offers amid a reshuffling of employees at the federal agency, which has been a focus of the Trump administration’s workforce cuts.

With the Department of Government Efficiency (DOGE) claiming to root out fraud and waste in federal agencies, financial experts are cautiously watching how things will shake out, but generally anticipate a focus on deregulation and efficiency as the administration has targeted these topics at other agencies as well.

And to be sure, HUD can use such improvements to reduce red-tape, David Young, managing director at Greystone, told Skilled Nursing News.

Long HUD queues could be temporary, he said, if the administration pursues privatization of HUD and a reversal of certain policies – particularly those pertaining to environmental regulation – that impact HUD loans.

Loans and other types of financing through HUD have long been preferred by nursing homes, thanks to its long-term financing conditions and lower interest rates, Young noted. And, he doesn’t expect that nursing home operators will forego HUD financing for other types of financing because of its non-recourse, low fixed-rate financing.

Greystone is the largest HUD lender by typically double, with $479 million actively engaged across HUD transactions, bridge loans and debt placement, and about $130 million in the queue currently, Young said.

To many financial experts in the nursing home sector, persistently long queues to secure such funding are concerning.

“The HUD queue is growing. That queue used to be maybe 60 to 90 days … it’s closer to 120 days now that you’re going to wait until HUD underwrites your deal,” VIUM Capital Managing Director Josh Vander Plaats told Skilled Nursing News.

While some may choose conventional bank financing if significant delays continue, Vander Plaats said most owner/operators that prefer HUD financing now will continue to do so.

Dwindling staff

Combine the growing queue with the new administration’s focus on government employees and offering buyouts, and there are grounds for a lot of uncertainty circulating right now as to what HUD staff will look like in the future, said Vander Plaats.

“There’s definitely some headwinds there to getting your deal done quickly. If you are interested in financing, it makes sense to start sooner rather than later, just because those timelines could get drawn out,” said Vander Plaats.

Toward the end of March, about 150 employees faced layoffs, and additional reductions in staff are expected in the coming weeks, potentially eliminating local HUD staffing in up to 34 states, according to a report in the National Mortgage Professional.

And in mid-February, Antonio Gaines, president of the union AFGE National Council 222, told Bloomberg Law, that HUD was expected to cut half of its workers. This is in addition to a 13% reduction in staff as a result of probationary staff terminations and the deferred resignation program offer taken by staff members.

Possible privatization of HUD

For Young, the process for HUD loans should eventually pick up speed. However, it’s still unclear how things will land, considering the administration’s push toward privatization for mortgage-backed securities along the lines of Fannie Mae and Freddie Mac loans. SNF loans through HUD are currently backed by Ginnie Mae, which is not privatized.

Fannie Mae and Freddie Mac act as intermediaries between lenders, investors and borrowers in the housing market, making it easier for lenders to fund new loans and for investors to purchase mortgage-backed securities.

Fannie and Freddie aren’t entirely private – they operate as privately held companies but also receive government guarantees on their obligations and are subject to government regulation. HUD Secretary Scott Turner seeks to fully privatize the two firms under the Trump administration.

Meanwhile, the backer of HUD loans, Ginnie Mae operates as a government-owned corporation within HUD, Young said.

If the administration chooses to privatize Ginnie Mae as well, nursing home operators could see quicker loan approvals, albeit with “interesting risk share,” Young noted.

“If [privatization of Ginnie Mae] happens, then there will be faster underwriting timelines and processing time.”

Less regulation for HUD lending

For HUD loans to be granted, certain environmental requirements have to be met, and these have grown over the years, a lot of which Young expects will be swept away by the Trump administration. Such removals could generate interest in new construction of nursing homes using HUD financing.

Right now, HUD financing is typically used for refurbishing properties because of all the difficulties in obtaining loans for new construction, including higher costs associated with wage determinations for a federal project. It’s more red tape for nursing home operators, including but not limited to environmental requirements needed during the underwriting process.

As an example, Young pointed to the Davis-Bacon wage determinations, which require federally funded projects to pay essentially union-like wages to workers on environmental projects.

“It can increase your construction contract 10%-plus just by using Davis Bacon wages,” said Young.

In addition, architectural modifications and cost surveys also add burdens and could be rolled back, Young said. Also, flood analysis with potential sea levels rising could be removed as well as a requirement, especially in certain areas where it’s a foregone conclusion. This would mean one less exhibit to prepare, picking up time on the application submission, review and approval processes.

All this would ease the process.

“The scope of work, for instance, of your phase one report would be cleaner, easier, simpler,” said Young. “You’re going to have a lot more interest in HUD, provided it doesn’t take 15-plus months to get approval on new construction.”

Ultimately, people will continue to queue up for HUD lending in the skilled nursing space, since it’s the best avenue of finance given the program’s ability to lower the interest rate through the interest rate reduction (IRR) program, Young said.

“It’s the only spot for long-term, nonrecourse financing in nursing homes,” said Young.