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LEAN Healthcare Process Update

LEAN Healthcare Process Update. Moderator: Jon Camps, Love Funding Panelists: Renee’ Greenman, Acting Director, LEAN Field Operations Tim Gruenes, Workload Manager, HUD- OIHCF Patrick Berry, Workload Manager, HUD-OIHCf . Overview and Statistics. Lean Closings – Calendar Year.

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LEAN Healthcare Process Update

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  1. LEAN Healthcare Process Update Moderator: Jon Camps, Love Funding Panelists: Renee’ Greenman, Acting Director, LEAN Field Operations Tim Gruenes, Workload Manager, HUD- OIHCF Patrick Berry, Workload Manager, HUD-OIHCf

  2. Overview and Statistics

  3. Lean Closings – Calendar Year

  4. Average Time to Lean ClosingAll Lean Closings • Average Days to Firm = 66 • Average Days to Closing = 127

  5. All Lean Firm Issued or Closed

  6. Queue Statistics • Queue (non-223a7’s) = 115 Projects • Of these, currently 16 with Risk Assessments that passed • 223a7 Queue = 1 Projects • Preapplication = 8 Projects

  7. Average Days in Queue by Month Entered in Queue

  8. Medium & Large Portfolios

  9. Improvements • Green Team – and results • 1st project assigned 1/8/10 • 20 Projects Processed to Firm/Reject • Avg. days from UW assignment to Firm/Reject = 17 • Last assignment 1 month quicker out of queue than non-green. • Difference will increase as only 16 of 115 in queue passed Risk Assessment • Lead = Tom McMillan

  10. Improvements • Assignment of Env. and OGC reviewers while in Queue • Processing of APPS/2530’s on Green Team projects while projects in Queue • Team reviewing Pre-applications in queue • Removed Preapplication process and implementing revised Firm process to replace – details later.

  11. New Two Stage Process for New Construction & Sub-Rehab

  12. In Lieu of Pre-Apps Option 1: Full Option 2: Staged • Full Firm Application (unchanged from current option) • Initial Submission • Final Submission

  13. Staged Application Basics HUD Issues Commitment or Passes Closing

  14. Initial Submission • FHA Application Fee – 0.3% of mortgage • If HUD elects NOT to continue with the loan, ½ of the application fee can be refunded. • If HUD issues a commitment, the Lender has 10 business days to decline the commitment and request a refund of ½ of the application fee. • Market Study / Appraisal / Environmental • Complete review and approval of Market and Value • Environmental review starts immediately • Same expiration time frames

  15. Initial Submission • Mortgage Sized on Fair Market Value and Debt Service • Qualify Mortgagor / Operator / Management Agent • Full submission of exhibits (just like direct to firm) • Full HUD review • Final Submission permits for modifications • Limited Plans • Minimum submission similar to MAP Pre-App • Changes to plans after initial submission that affect value will require an appraisal update at Final Submission

  16. Initial Submission Other Submission Exhibits • Site Control • Certificate of Need (if applicable) • Title Search & Pro Forma • Land Title Survey • Budgets • Stabilized Operations • Initial Lease-Up • Development Costs • Affirmative Fair Housing Marketing Plan • Additional Facility Information • Early Commencement of Construction Exhibits(if applicable)

  17. HUD Review of Initial Submission

  18. Commitment • Term: • 120 days with one 120 day extension • Extension request must demonstrate forward progress on development • Extension requires updated appraisal and market study with final submission • Extension may require additional conditions as well • Re-opening fees and rules apply after extension period • New Conditions: • Submission of complete plans and specs • HUD approval of General Contractor / Architect(s) • HUD review and approval of Final Exhibit Submission • HUD review and approval of any 3rd Party Updates (as needed) • Mortgage Re-calculated with all applicable criteria • Lender has 10 business days to reject commitment

  19. Final Submission • Updated Underwriting • Architectural Review • Cost Review • Contractor Exhibits • Architectural Exhibits • Final Plans / Specs • AIA B181(s) • Certifications • HUD-2328 • Major Movable Schedule • Construction Schedule • Soil Report • State Licensing • Additional Funding Source documentation • PLI exhibits • Property Insurance Requirements / Schedule • Zoning/Code Compliance • Utility Assurance • Other Misc. Exhibits • Updates of Initial Submission • Commitment Amendment • Draft Closing Documents

  20. HUD Review of Final Submission

  21. Update on Status of This Program • Draft documents should be posted this week for the initial submission process on HUD.GOV • Beta testing of a live deal to verify process and documents are correct • Final Submission documents will be posted to HUD.GOV upon the beta test coming in for final submission

  22. Early Commencement of Construction • Early Commencement of Construction Checklist, including: • Memo • Form HUD-92415, and Rider • Permits • Construction Contract, and Rider • Specifications, Division 1 • Environmental Documents • Procedures for requesting Early Commencement approval.

  23. Tips and Observations:PreConstruction Conference & Construction Phase • Lender and the PreConstruction Conference • Prior to the PreConstruction Conference • The PreConstruction Conference • After the PreConstruction Conference • Construction Phase • HUD Inspections • Communication

  24. NC/SR/241a Closings - What’s New?

  25. NC/SR/241a Closings • Team developing procedures for Cost Cert. Checklist (lender deliverables). • If interested in volunteering to help in development, email Gary Golding. • OGC developing revised Initial Closing and Final Closing Checklists. • Mollie Yeatts in Seattle is now handling the program side of NC/SR/241a Initial Closings, the Cost Certification review and the Final Closing

  26. HUD.GOV

  27. Lender Processing Information: Revised Section 232/223(f) Documents Original Section 232/223(f) Documents Pre-Application: (Link removed per December 18, 2009 Email Blast) Initial Submittal of Firm (NC, SR, 241a): (Under Construction) Existing Construction with New Addition: (Under Construction) Section 232 New Construction Section 232 Substantial Rehabilitation Section 232/241(a) Section 223(a)(7) on a 232 Section 223(d): (Under construction) Early Commencement of Construction Accounts Receivable Financing Documents Sample Closing Documents TAP OIHCF Processing of 232’s: (Under Construction)

  28. Want to view a list of new construction and substantial rehabilitation projects that are proposed or under construction under Lean?See the below links. Please note, the first link contains a spreadsheet from August of 2009 and includes # of units and type of facility. The second link contains a spreadsheet that is more up to date, but does not include # of units and type of facility - we are unable to obtain this data from our systems at this time. We ask that you use both of these spreadsheets until we have time to address our systems."Link to spreadsheet from August of 2009" "Link to spreadsheet to more updated spreadsheet" Want to find out about HUD's Queue for processing 232's? Visit the "Queue Update" or go toPrevious Queue Updates

  29. Lean Snapshot of Projects March 5, 2010 Lean 232 Closings: Week ending 3/5/2010 = 2 Fiscal Year to Date: 85 Projects with Firms Issued that haven’t reached closing: 223a7: 15 All others: 49 Total: 64 Firms in Process or Preliminary Reject (no Firm Issued yet): 223a7: 23 All others: 44 Total: 67……………………………..

  30. Revised Section 223f Documents

  31. Phase in of new documents • New documents to be posted to HUD.GOV soon. • Email Blast – to officially announce. • Initially: Lenders have option of using either version • When lender sends hard copies, lender notifies HUD UW whether old or new are used. • Lender must entirely use either all old or new docs • 90 days from Email Blast – all submissions must use new documents.

  32. Some of Changes…….. • Certs will contain language on DACA requirements. • Risk Assessment Worksheet required • Clarification to how treat Mgmt Agent in situations with separate Operator (Lease) • Removes Form 92438 • Requires proof of Business Partners Registration System registration • Master Lease – if portfolio

  33. Some of Changes…….. • Medicare/Medicaid – SNF’s: How addressing upcoming Sprinkler Requirements, if applicable. • Clarifies requirements on surveys on other facilities

  34. Recommendations for Lean 232 Submittals

  35. Loan Sizing

  36. Loan Sizing – Statute, Regs, MAP * On new construction mortgage not to exceed 90% of HUD Replacement Cost

  37. For Lean Projects, Start here……………..

  38. Benchmarks – 11/20/09 Email Blast * On new construction, mortgage not to exceed 90% of HUD Replacement Cost

  39. Loan Sizing – Continued • Not-for-Profit Owners and Operators: To achieve the more liberal LTV benchmark, must demonstrate: • A successful operating track record • Significant project operating and management experience • A solid financial track record • If exceeding LTV’s on previous slide, need significant justification/mitigation of why low risk for HUD.

  40. Loan Sizing – Potential Mitigants • Conservative Underwriting – (NOI, Cap Rate, etc.) • NOI based upon historical operations • Cap Rate reflects project’s risks • Stable NOI, Occupancy, Payor %’s.

  41. Loan Sizing – Potential Mitigants • Debt Coverage Ratio (based on historical NOI) • Large Initial Operating Deficit and/or Debt Service Reserve • Replacement facility = less risk of rent up • Strength of market • Experience of participants

  42. If Instability in Historical NOI…. • Suggest lender submit updated financial statements to OIHCF Underwriter when project comes out of queue (UW may request either way).

  43. If 223f, Purchase…… • Fully investigate and explain any potential Identity of Interest situations between seller and purchaser (“however slight”). • Also see February 20, 2009 Email Blast (current operator continuing as operator after sale).

  44. Completing the 92264- HCF • Reflect Lender’s conclusions (not appraiser), exception: • Section J, K, L and M (appraiser conclusions). • Section D (Salaries), not required • G6 and G7 blank – Proprietary Earnings Carve Out.

  45. Completing the 92264- HCF • On 223f’s if no cost approach, do not complete Section H • Signed by Lender (not appraiser)

  46. If Project Receives State Inspections….. • Survey deficiencies must be addressed - particularly repetitive findings

  47. Risk Assessment • Calls for historical NOI #’s. Do not use prospective #’s. • We want to have OIHCF Appraiser review projects where no history at the underwritten NOI.

  48. Third Party Reports • Review details • Ensure repairs are clearly specified • Remaining Economic Life • Cost Approach to Value

  49. Application Packages • Include completed Firm Checklist • Tab according to HUD checklist • Don’t bind too many docs together • Include any prior OIHCF staff guidance • If clean submission (Title, License, PLI, A/R) then quicker/easier to close

  50. Other General Issues • Proofread! • Math (Is it right? Is it consistent?) • Charts (do they contradict each other?) • Complete the Business Partner Registration System (for paper 2530s)

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