Building owners and investors usually scoff at the Section 232 Program run by the Department of Housing and Urban Development (HUD) because of the very lengthy and inefficient mortgage approval process.

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But the government agency's revamped program for nursing homes and assisted living buildings is welcome news to seniors housing owners and operators seeking ways to finance projects amid the credit squeeze.

“This new program represents a dramatic shift,” says Jeff Davis, chairman of Chicago-based Cambridge Realty Capital. The much-needed overhaul was inspired by Toyota's successful Lean Management production process that seeks to eliminate waste and simplify systems. The Lean process has been embraced by many different industries, including healthcare companies.

“We asked people what needed to be fixed and we got some honest answers,” says Bill Lammers, acting director of the Lean program at HUD's Office of Insured Health Care Facilities (OIHCF) in Washington, D.C. Seniors housing industry lenders worked with HUD to craft the new process.

Previously, applications were submitted to regional HUD offices. Now lenders submit a complete package to HUD online. Loans that previously took four to six months to process will be turned around in about 40 days.

HUD introduced the Lean program for the refinancing and acquisition of seniors housing properties last July. Ten commitments have closed so far; another 70 deals are in the pipeline. In November, HUD conducted a training seminar for lenders and will now also accept applications for new construction and substantial rehab projects.

Loan proceeds for acquisition and refinancing average about $9 million. Loans for new construction average about $35 million. HUD expects to process about 300 to 400 loans this year — a 100% jump in the number of loans that closed last year under the old system.

Raelee Jones, senior FHA underwriter at Wells Fargo in Portland, Ore., helped put the Lean program together. From a borrower's perspective, she says, loan terms have not changed. The maximum loan-to-value remains at 85% in the case of for-profit borrowers.

Lammers of HUD notes that appraisals are getting a close look as property values have slipped. “Appraisals must reflect current market conditions,” he says.

Guardian Angel Healthcare in Post Falls, Idaho, was the first HUD deal to close using the new Lean program. The $4.4 million refinancing of an assisted living facility closed in 21 days from application submission to closing.

Tom Peters, senior vice president of CWCapital originated the deal. Under the new program,, says Peters, “time frames are reduced and the outcome is more predictable and reliable.”