Hud Healthcare Lenders Post ‘phenomenal’ Fy 2025 due To Pent-up Demand

By Matt Valley

A convergence of forces led to a dramatic surge in deal volume for lenders in the U.S. Department of Housing and Urban Development’s Section 232 healthcare mortgage insurance program in fiscal year (FY) 2025.

Rising occupancies and improving financial performance at skilled nursing and assisted living facilities, a drop in long-term interest rates and the successful rollout of HUD’s Express Lane initiative in mid-2025 all played a factor.

The final tally shows lenders in the program closed $5.96 billion in loans for the 12-month period that ended Sept. 30, 2025, up from $3.15 billion the prior year, an 89 percent increase. 

“I knew it was going to be a phenomenal year. You could see it in our production; you could see it in everyone’s production. We were getting requests left and right,” says Michael Gehl, chief investment officer, FHA Lending, at Plano, Texas-based NewPoint Real Estate Capital. 

Many borrowers approached NewPoint in FY 2025 to say that the timing was right for them to refinance their bridge loans through HUD because their properties “hit the numbers they needed to be at” in terms of occupancy and stabilization, according to Gehl.

Tommy Dillon, director of long-term care at Baltimore-based Capital Funding Group (CFG), concurs that a major contributor for the spike in annual deal volume in FY 2025 was the meaningful stabilization of facilities in 2024 and 2025 as properties continued to recover from the pandemic-era declines in census and operations.

“Improvements in occupancy, reimbursement trends and the reduction of agency staffing strengthened financial performance and enabled many facilities to meet HUD’s underwriting thresholds for the first time in several years. This pent-up pipeline effect resulted in a number of transactions that were initiated in 2024 but ultimately closed in FY 2025, significantly boosting the year’s overall loan volume,” says Dillon.

Asset performance continued to improve in FY 2025, with many properties returning to or surpassing pre-COVID 19 occupancy levels, says Steve Kennedy, executive managing director at Columbus, Ohio-based VIUM Capital. 

“At the same time, inflation has moderated, which is helping tame expense growth, especially wages and other operating costs, and that has strengthened debt-service coverage across the sector,” explains Kennedy. 

According to the National Investment Center for Seniors Housing & Care (NIC), the occupancy rate for assisted living properties across the top 31 primary markets it tracks was 87.2 percent in the third quarter of 2025, an increase of 90 basis points over the prior quarter. Average occupancy at nursing care properties was unchanged in the third quarter at 86.3 percent, but well above the COVID-19 pandemic lows of 74 to 75 percent in 2021.

Long-term interest rates moved down during calendar year 2025, which expanded the number of refinancing opportunities and attracted more borrowers to the market, notes Kennedy. The U.S. 10-year Treasury yield, which began 2025 at approximately 4.6 percent, stood at 4.1 percent on Sept. 30.

Due to a lack of alternative cost-effective sources of permanent financing for skilled nursing and seniors housing assets, HUD also continues to be the most compelling takeout option for many owners and operators, emphasizes Kennedy.

Leader of the Pack

HUD’s Office of Residential Care Facilities (ORCF) administers the Section 232 loan program, also commonly referred to as the HUD LEAN 232 program. LEAN is not an acronym, but rather a process patterned after Toyota’s model of efficiency that significantly reduces waiting times by streamlining the entire loan application and approval process. The HUD LEAN program originated in 2008.

 Section 232 is a Federal Housing Administration (FHA) loan product that provides mortgage insurance for residential care facilities, including nursing homes and assisted living facilities.

Greystone once again ranked as the top lender in the HUD Section 232 program with $1.38 billion in deal volume across 74 transactions, up from $708.3 million and 52 transactions the prior year. That’s an approximate 95 percent increase by dollar volume.

“It feels gratifying to be the No. 1 lender again, but for Greystone, the ranking is really a byproduct of staying true to our mission — delivering exceptional client service and solving complex financing needs with creativity and certainty,” says Sampada D’silva, chief credit officer, healthcare, at New York City-based Greystone. 

Not only did Greystone close more deals than the year before, but there were significantly larger ones in the mix, says D’silva. The firm’s average deal size in FY 2025 was $18.7 million. 

“The pattern strongly suggests a substantial wave of bridge-to-HUD takeouts, an area where Greystone is one of the industry’s most active lenders. When multiple bridge loans convert in the same fiscal year, volume spikes quickly, and that appears to have been a major driver,” she points out. 

“Market and regulatory dynamics also widened the pipeline. HUD’s increase in corporate credit review (CCR) limits expanded the eligible deal universe and pushed additional transactions into Greystone’s HUD pipeline,” notes D’silva. 

In April 2024, HUD increased the portfolio size that triggers a CCR from an aggregate unpaid mortgage amount of $90 million to approximately $194 million. This update eased the approval process for large healthcare operators by reducing the need for time-consuming CCRs, which can take 90 or more days. 

Much like Greystone, VIUM experienced a dramatic year-over-year growth in deal volume in FY 2025. VIUM closed 44 loans totaling $714.4 million, making it the third largest lender by dollar volume. By comparison, VIUM closed $344.8 million in loans across 34 deals in FY 2024. That’s a 107 percent increase by dollar volume over the prior year.

NewPoint ranked as the fifth largest lender in the program in FY 2025. The firm closed 24 loans totaling $445.4 million, up from $341.4 million and 11 transactions the prior year, a 30 percent increase by dollar volume.

CFG, which ranked seventh among the top 10 lenders for FY 2025, closed 21 loans totaling $311.4 million, up from 15 loans and $170.7 million in FY 2024, an 82 percent increase.

Breakdown by Loan Type

The number of transactions in the HUD section 232 program rose from 202 in FY 2024 to 337 in FY 2025, a 67 percent increase. The average deal size climbed from $14.3 million to $17.6 million.

Of the 337 loans closed through the mortgage insurance program in FY 2025, 329 were HUD 232/223(f) loans used for acquiring or refinancing existing seniors housing and healthcare properties such as nursing homes and assisted living facilities. 

Seven transactions in the Section 232 program that closed in FY 2025 were in the “New Construction and Other” category. That loan type includes financing for the construction of brand-new skilled nursing, assisted living and board and care facilities. This category also covers financing for the substantial rehabilitation of such facilities. 

One lone HUD 232/223(a)(7) loan closed in FY 2025. This loan type is a streamlined option for refinancing an existing FHA-insured loan to either lower the interest rate, improve cash flow or extend the loan term, often requiring fewer third-party reports. For context purposes, lenders closed 147 (a)(7) loans in FY 2021, a period of extremely low rates.

Fast Start for Express Lane Rollout

In June 2025, HUD launched a new “Express Lane” to prioritize the review of certain low-risk, low-leverage 232/223(f) transactions to cut the time between the loan application submission and the issuance of a firm commitment to 10 to 15 days. Previously, FHA managed reviews of all Section 232 applications based on the date of application submission, resulting in processing times of up to 150 days, regardless of the transaction. 

FHA has specific criteria for transactions that will be eligible for Express Lane processing, including a maximum of 70 percent loan-to-value and limits on the allowable minimum debt-service coverage ratios.

CFG’s Dillon says that the Express Lane has been an encouraging development and that the initial results have been quite positive.

“CFG is already seeing significantly reduced timelines to receive a HUD firm commitment on deals that qualified and were submitted under the Express Lane program. The streamlined approach has made the process feel more efficient and predictable. It’s still new, but the early results are strong and a real accelerator for these types of applications,” says Dillon.

Greystone’s D’silva echoes those sentiments. “It’s still early, but the initial results of HUD’s Section 232 Express Lane program are very promising. The Express Lane appears to be a strong step forward in modernizing HUD’s processing efficiency, a clear sign that HUD is serious about responsiveness and operational improvement.”

Gehl notes that NewPoint received the first loan commitment from the Express Lane initiative. “We were in the queue for one week and received a commitment in less than one week. For those lower leverage transactions, it is a much faster execution.”

Ross Holland, managing director at Ikaria Capital Group who runs the firm’s West Coast operation from his office in Newport Beach, California, says that from a processing standpoint, the new Express Lane review process appears to have accomplished its goals.

“Hopefully, the coming year will cement the protocol for quick processing times for these deals. The challenge the Section 232 program faces — and leadership is well aware of it — is to similarly shorten the timeframe for the legal closing process for these loans. Once accomplished, the full vision of the Express Lane will truly be a reality and a huge step forward,” says Holland.

Ikaria is a relative newcomer to the HUD Section 232 program. The Cleveland, Ohio-based company launched in September 2024 but has a pipeline of deals in excess of $2 billion. 

Headwinds, Tailwinds

With occupancies rising, demand outstripping supply and favorable demographics increasingly coming into play as the oldest baby boomers turn 80 this year, the seniors housing and care industry has the wind at its back on many fronts. 

“It is nice to see some tailwinds at this point,” says Gehl. “Long term, there are still some labor challenges — not at the level we saw during COVID with rampant agency staffing utilization — but some challenges still exist.”

In October 2025, the North Carolina Department of Health and Human Services implemented reimbursement rate cuts between 3 and 10 percent for most medical providers to prevent a $319 million state funding gap, notes Gehl. Two months later, Gov. Josh Stein directed the agency to reverse the cuts and restore reimbursement rates to levels in place on Sept. 30, 2025. A long-term funding solution is being negotiated by the state legislature.

“We have to keep an eye on [Medicaid] reimbursement. We have had a nice couple years at the state level. Hopefully, North Carolina is just an outlier,” says Gehl, referring to Medicaid reimbursement cuts.

The launch of the Department of Government Efficiency (DOGE) on Jan. 20, 2025, by the Trump administration caused some operational upheaval at HUD early on, according to Gehl. DOGE focused on cost cutting across the federal government. HUD was no different and faced several impacts, he points out. 

“At HUD, after DOGE and the voluntary early retirements, we definitely have a shortage at the Office of General Counsel (OGC), which has caused the closing process to be longer than it was previously. HUD is aware and trying to address the situation,” says Gehl. OGC is the agency’s legal department.

D’silva believes several headwinds still warrant caution. “The most significant is interest rate volatility, which continues to affect valuations, refinance feasibility, and borrower leverage. In addition, rising operating costs — particularly for labor, insurance and maintenance — are pressuring margins, even as revenues improve,” she says.

There’s also regulatory and reimbursement uncertainty, especially for skilled nursing, where policy shifts or state funding changes can quickly impact performance, according to D’silva. 

Lastly, construction and transition risk in newer or repositioned properties remains a concern until stabilized occupancy and cash flow are proven, emphasizes D’silva. 

“In short, while fundamentals are strengthening, prudent underwriting under the HUD 232 program means balancing optimism with disciplined risk assessment and conservative projections,” she concludes. 

From Dillon’s perspective, labor challenges persist, but the industry is seeing gradual improvement in staffing stability and wage predictability, which supports healthier long-term operating margins. 

Meanwhile, Medicaid reimbursement has lagged behind the rapid wage escalation of recent years, says Dillon. The good news is that many states are now showing signs of meaningful rate improvement, helping operators better align revenue with today’s cost environment, he notes. 

Jason Smeck, director of seniors housing and healthcare production at Lument, says the graying of America presents a challenge because there are fewer workforce-age people to care for the substantial senior population. Lument closed 18 loans totaling $244.4 million in FY 2025, making it the ninth largest lender by deal volume.

“Seniors housing is an operationally heavy industry with great reliance on healthcare workers, particularly nurses, aides and food service,” he emphasizes. “It remains an open question whether the supply of labor is sufficient to keep up with the growing demand for healthcare across multiple healthcare outlets and other competing industries.”

Kennedy believes processing delays and staffing shortages at ORCF and OGC present the biggest challenge ahead. “Closing attorney assignment times are running as long as 45 days, although this is expected to improve gradually as HUD rebalances workloads. Otherwise, market fundamentals for seniors housing remain sound, and we see continued support from Medicaid waiver expansions in several states.”

Predictions

Gazing into their crystal ball, lenders are bullish on the sector as a whole for FY 2026, despite the temporary setback caused by the federal government shutdown, which began Oct. 1, 2025, and lasted for 43 days, resulting in a backlog of loan closings. 

Jonathan Camps, managing director of HUD lending for Forbright Bank, expects HUD closings will increase in FY 2026 based on the number of applications received and firm commitments issued thus far. 

“HUD is on pace to close 450 transactions, which would mark a 33 percent increase by number of loans closed. I would expect volume to increase by at least a similar percentage, perhaps more, depending on average loan size, which increased from FY 2024 to FY 2025. (The average loan size in FY 2024 was $14.3 million and $17.6 million in FY 2025.)

Camps notes that Forbright has observed significant acquisition, turnaround and recapitalization activity, particularly in the skilled nursing sector, for the past several years. 

Most of the bridge loans that Forbright holds on its balance sheet for skilled nursing assets are designed to exit to HUD. “As a result, we can closely predict what will exit to HUD in 2026 and beyond. The same is likely true for other bridge-to-HUD lenders in the space. Hence, our prediction is that FY 2026 will be one of growth for HUD,” explains Camps.

Forbright closed seven transactions totaling $130 million utilizing HUD’s 232 program during FY 2025. The lender expects to close approximately $250 million in HUD 232 business during FY 2026. 

Lument’s Smeck also anticipates the total volume of loan closings by dollar amount across the HUD Section 232 industry will be higher than in FY 2025, in spite of the recent government shutdown and the delays in loan processing that ensued.

“Lument has already submitted application volume that surpasses our loan volume in fiscal years 2024 and 2025 and is poised for a very strong year,” he says.

ORCF reports that over $7.5 billion in firm commitments were issued in FY 2025. While many of those firm commitments reached initial endorsement (closing) over the course of the year, a significant number did not, according to Smeck. 

“This provides a big boost to production for the start of FY 2026. New application volume has actually picked up over the most recent months as we have seen a slight decline in long-term interest rates, prompting owners to seek the security of a long-term, non-recourse debt structure that the [HUD Section 232] program provides.” The U.S. 10-year Treasury yield closed at 4.17 percent on Jan. 15.

Ikaria’s Holland also anticipates deal volume in FY 2026 will surpass the prior year’s total. Why? “The government shutdown will have pushed some volume into 2026, and the full effect of the Express Lane will be reflected in 2026 stats,” he explains. “Also, the interest rate environment is likely to get the fiscal year off to a quicker start than last year.”

The VIUM Capital team expects loan volume in FY 2026 to meet or exceed FY 2025, supported by slightly improved interest rate conditions. “The efficiency of ORCF under recently confirmed FHA Commissioner Frank Cassidy should support steady production,” says Kennedy. “However, the months following the shutdown are experiencing some processing bottlenecks due to a buildup in the queue and a limited number of closing attorneys.”

Prior to the shutdown, HUD did a “fantastic job” of reducing the time in the queue to approximately 30 days, down from an average of about 90 days, according to Camps.

“Unfortunately, the six-week government shutdown created a significant backlog, and it appears we are back to about a 90-day wait time to exit the queue, with about 90 applications currently in the queue that do not qualify for the Express Lane,” stated Camps in early January. 

“I am confident that once HUD can work through the backlog, even with the anticipated increase in applications, the queue will revert to a 30- to 60-day wait.”

— This article originally appeared in the December 2025-January 2026 issue of Seniors Housing Business magazine.

The post HUD Healthcare Lenders Post ‘Phenomenal’ FY 2025 Due to Pent-Up Demand appeared first on Seniors Housing Business.