HUD Revised Questions and Answers / 2024

Does HUD require a credit check? - Not technically Andy must check a box saying that the borrower has a clean credit background, and no outstanding liens, judgement, etc..The only way to be able to check this box with confidence is to have a full credit check performed on each borrower. How are the MIP payments calculated - 65bps applied to the (to-be) amortized balance at the end of the CURRENT loan year. What are potential consequences of moving closing a HUD deal with one owner/operator entity in place? - 1. In the event of a lawsuit against the facility, you could potentially lose everything, if they are separated out, you could limit any potential liability to just the operator 2. You will be required to do a full audit on the operations, not just owner certified statements. This is extremely expensive, we've seen bills over $40K 3. Based on our experiences, it is extremely simple to quick claim deed the property into a new entity and not expensive. 4. In order to separate the entities post-closing, it will be much more difficult and take much longer 5. With just 1 owner/operator entity, you will subject yourselves to much more HUD oversight. HUD does not look as closely at the operator as the borrower. They regulate the balance sheet of the borrower, not the operator, so any borrowing, all accounts receivable and payable will be subject to HUD oversight if they don't separate 6. Technically, there are two assets here, the building and the license. Down the road Jack/Joy would be able to sell the operations or building if they wanted to and still own the other piece. A potential exit strategy