A recent Seniors Housing Study released by National Real Estate Investor and Senior Housing Investment Advisor showed nearly half of survey respondents indicating HUD’s Lean 232 program had fallen short of their expectations, but lenders say this is due to the long waiting period from the backlog of applications for the program, not the program itself
At 47%, the number of dissatisfied participants outweighed the 42% who reported being satisfied; only 4% said it had exceeded their expectations. However, those numbers would likely be different if the program was more timely, says Josh Hausfeld, vice president of Love Funding.
“It’s a great program, it just takes a while to get to the end,” Hausfeld told SHN. “A lot of frustration is built around the timeframe associated with getting to the closing table.”
The HUD queue stretched so long earlier this year that in July, Summit Consulting, LLC was called in to support underwriting efforts and help expedite the application process; this came after Congress criticized HUD for not giving the program enough priority. In August, the queue of unassigned applications was at 354, with a further 119 in underwriting review, and the year-to-date total of received applications at 649.
By the first week of October, FY 2011′s year-to-date total of received applications had reached 708, while the HUD queue had shrunk to 301, with 116 in underwriting review, but the timeframe is still frustrating to many loan applicants.
Although Hausfeld wasn’t surprised at the level of discontent with the Lean program, he says his company’s clients are “really happy” upon reaching the closing table, and appreciate the fact that there is available capital for them to tap into. The program offers attractive interest rates and terms and provides the possibility for unique transactions, taking out construction loans, acquiring properties, and funding for improvements or additions, he says.
However, the program’s attractiveness is marred by the long waiting list, and Hausfeld wasn’t the only one to point this out.
“The program started at a 30 day timeframe, and it’s grown to about a year,” says Kass Matt, senior vice president at Lancaster Pollard. “If our clients are submitting applications into the abyss, and not hearing updates from their lenders about where they stand, there’s going to be a level of frustration.”
With private funding often scarce for both seniors housing, as well as housing in general, many have come to rely on government programs such as the Lean 232 program, where the Federal Housing Administration (FHA) insures loans for senior housing projects, including skilled nursing and assisted living facilities.
However, that reliance served to inundate the waiting list with applicants seeking HUD’s stamp of approval, and the original 30-60 day timeframe given when the program first rolled out is taking more like six to 10 months, or even a year, says Hausfeld.
“What’s causing the delay, is that once you submit the application, it will sit at HUD for six to eight months before someone even picks it up,” Hausfeld explained; in that sense, “[the program] really hasn’t met industry expectations.”
“If that [wait] were eliminated, everything would run really smoothly,” he continued, mentioning the hundreds of applications still lined up in HUD’s queue.
It’s mainly an issue of communication and an issue of frustration on how long the process is, relative to its originally stated timeframe, says Matt. The program was laid out to address timing and inconsistencies, and while it has addressed inconsistencies, the timeliness has gotten worse. However, he says the benefits of the program outweigh the waiting period, especially as the department is taking steps toward shortening the process.
After HUD contracted Summit Consulting, there was an immediate bump in the queue, he continued, saying he has a “very good feeling and a sense that the queue will continue to go down.”