To borrow a baseball phrase, the rallying cry among lenders in the HUD Lean Section 232 mortgage insurance program used to finance nursing homes and assisted living facilities is “Wait ’Til Next Year.” The combination of rising interest rates and volatility in the capital markets has led to a slump in deal volume, but lenders see this situation as a temporary setback.
Transaction activity has actually been waning the past few years. Deal volume totaled $2.95 billion in fiscal year (FY) 2022, down 25 percent from the prior year.
“With a few months remaining in HUD’s 2023 fiscal year (which ends Sept. 30), if the HUD 232 program hits $2 billion that could be considered a win,” says Patrick Shearer, director, seniors housing lending, Greystone.
“It is going to depend on interest rates moderating, which will moderate the spread for Ginnie Mae mortgage bond rates over the 10-year U.S. Treasury yield. It is also going to depend on moderation in the business level challenges of occupancy and expense pressures, particularly from labor,” adds Shearer.
Read the entire article at Seniors Housing Business.