Case Study

Due Diligence Underwriting for the Office of Healthcare Programs at HUD

Challenge: The U.S. Department of Housing and Urban Development (HUD) Federal Housing Administration (FHA) Office of Healthcare Programs (OHP) insures mortgages on residential healthcare facilities, including nursing homes, assisted living facilities, and rehabilitation hospitals. OHP requires a thorough review of the underwriting work of lender underwriters to ensure compliance with FHA policies before recommending approval or rejection before the FHA loan committee. In 2011, with other sources of lending for these types of properties drying up, FHA experienced a large influx of applications for mortgage insurance, leading to a backlog of applications, and significant increase in processing times on some applications.

Solution: The Summit Team is currently serving HUD FHA OHP by providing on-demand review of lender underwriting of FHA-insured mortgages on healthcare facilities. Within seven days after project start, our team was able to start reviewing loan application packages. Once all HUD-required reviews are in, our underwriting analysts are able to complete a review on a loan application within 15 days, decreasing application processing time, without compromising FHA’s oversight. Within nine months of the Team’s involvement and support, FHA OHP was able to decrease the queue of loans waiting underwriting from more than 400 to less than 10.

These underwriting due diligence reviews involve an assessment of local market conditions, five years of financial history for each facility, health and safety survey results and insurance claims, and the credit and managerial history of mortgagors and principals. For deficient applications, mitigation actions used by due diligence underwriters may include maintenance of debt service escrow accounts, quality management plan implementation, additional insurance requirements, and master leases across portfolios of properties with common management or ownership. In addition to providing underwriting services, Summit coordinates loan closings, manages hard copy application materials, and prepares packages for handovers of closed mortgages to FHA asset managers. Summit reviews loan packages that can range from individual facility mortgages of $3 million to portfolios of mortgages for multi-property organizations that may involve mortgage amounts up to $500 million.

In addition to strong performance reviews from FHA, members of the Summit Team have also received recognition from the mortgage banking industry for its contribution to FHA OHP, with a Senior Housing News article citing the Summit Team as playing a critical role in addressing a backlog of applications for HUD firm commitments.