HUD LEAN Loan Processing
Developed in 2008 for processing HUD 232 applications, Lean is a methodology based on Toyota’s model of operations. The goal is increased efficiency of the FHA 232 application process by reducing waste.
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In 2008, based on Toyota’s model of operations, HUD developed a new methodology pertaining to the way HUD 232 loan applications were processed. LEAN (or simply Lean) is actually not an acronym, but the simple name behind the new method of processing HUD 232 applications with the main goal of increased efficiency by reducing waste. According to HUD, the HUD 232 LEAN process, “employs standardized work products and processes to obtain a consistent, timely result.” While not a standalone loan product, LEAN processing significantly reduces waiting times and streamlines the entire loan application and approval process for investors and borrowers in need of HUD/FHA financing for a healthcare property.
2021 HUD 232 LEAN Loan Processing Changes
In order to reduce approval times, the HUD 232 LEAN process has instituted changes including:
- Forms, including lender templates, certifications, and other documentation, are standardized
- In most cases, duplicate forms and submissions are not required
- LEAN applications are not submitted by borrowers; instead, they are submitted by lenders directly to the OCRF (HUD's Office of Residential Care Facilities)
- HUD LEAN processing does not require propriety earning carve-outs
2021 HUD 232 LEAN Loan Requirements
HUD 232 LEAN processing also has specific requirements, including:
- Physical Property Exams: Third-party property exams are required in order to determine the condition of the property itself; for properties that may require a lot of repairs, a HUD 232 loan for substantial rehabilitation may be recommended.
- Credit Check: HUD/FHA will look at a borrower's credit history and financial experience to determine if they're a good fit for a HUD 232 loan.
- Developer Experience: HUD/FHA will also examine a developer's experience in the healthcare industry, especially the financial health of any healthcare properties that they currently own.
- Formal Incident Reports: HUD now requires that all properties using HUD 232 financing have a formal, software-based incident reporting system.
- Special Portfolio Reviews: For borrowers with more than one HUD 232-insured property, HUD may require a special review, and, for borrowers with three or more properties, HUD may require a master lease.