When Jeffrey Davis first started Cambridge Realty Capital in 1983, it served a broad real estate market, providing capital for all types of commercial real estate. Two years later, current President Andrew Erkes joined Davis in the young startup, bringing with him several years of experience working with HUD-insured multifamily and healthcare real estate loans. By then, the US Department of Housing and Urban Development was approximately 30 years old and maintaining a strong presence in US housing.
Davis’ zeal and Erkes’ experience notwithstanding, getting into the HUD market made sound business sense for the boutique commercial real estate lender. While in his early twenties’ Davis benefitted from working at a major Chicago mortgage banking firm with an excellent HUD multi-family execution, and Erkes was a HUD lender working at another mortgage banking firm. The program especially began to resonate with Davis during the Jimmy Carter era, when Prime was 22% and long-term rates were 14%, and HUD had a Ginnie Mae tandem program with long-term rates that were half of what they were in the commercial marketplace.
36 years later, neither Davis nor Erkes have any regrets about the shift in focus from general commercial real estate to the senior living sector. As for HUD lending, “There’s always an element of risk when getting involved with government programs because things can change with little notice. Sometimes programs even disappear entirely,” Davis remarked. “However, little has changed with the HUD loan program over the years. Not only does it remain a popular and practical loan product, it has helped millions of American seniors obtain affordable housing and healthcare, something that has always been one of HUD’s core values.”
With the goal of making housing attainable for every American, the HUD 232 program offers terms and rates designed to encourage the building and continued operation of nursing homes, assisted living facilities and board and care homes. This includes:
- Up to 35-year terms/amortization
- Fixed rates which are traditionally lower than those of conventional loans
- Non-recourse
Along the way, HUD made several changes that created a much more mainline program for borrowers with licensed senior housing and skilled nursing facilities. For years, HUD could never refinance any existing loan unless it was a HUD loan already in place. Many years ago, HUD changed this so that they could refinance any existing loan and not solely HUD loans. This was a major game-changer.
Second, in 2008, HUD introduced its new LEAN program. Previously, HUD loans had been processed under the Multi-Family Accelerated Processing (MAP) program, which was and is still used to process other types of HUD loans. However, for a variety of reasons, the MAP loans created unnecessary delays in senior housing and healthcare applications.
“Some senior living operators have the perception that the HUD 232 loan process is onerous and that HUD loans are difficult to qualify for,” said Davis. “And while the HUD 232 loan certainly has its own idiosyncrasies, it is by no means so arduous that it’s not worth considering. In fact, the terms and rates are highly favorable, and many senior living operators who wouldn’t qualify for a reasonable conventional loan interest rate have been able to qualify for a HUD 232 loan with rates typically between 4 and 5 percent, and sometimes as low as 3 or 4 percent.”
Besides, Cambridge serves not only as the HUD lender and underwriter, it also acts as an agent and problem-solver on behalf of the applicant. “Cambridge works closely with each applicant to ensure they gather and submit all of the right paperwork. Once this is done, Cambridge does all of the troubleshooting and takes care of all communications with the government, allowing the applicant to focus on their business,” Davis commented. Additionally, Cambridge developed its proprietary Signature Experience, a four-step process it uses to quickly identify a client’s needs and efficiently analyze options to come up with the best possible deal for that client’s unique and individualized needs.
“In choosing a lender, nothing is more important than experience and closed transactions, especially in the ever-changing world of finance and government financing mixed together,” Davis noted. Cambridge has closed more than 550 HUD loans, worth more than $5.5 billion in its lifetime, a statistic that continues to inspire confidence in the minds of Cambridge’s clients and demonstrate that a HUD loan is not only a viable option, but the best option for many senior living operators.
