COLUMBUS, Ohio--(BUSINESS WIRE)--Data recently released by the U.S. Department of Housing and Urban Development (HUD) shows that its Lean mortgage insurance program to finance seniors housing properties set a new record for its fiscal year ending Sept. 30, 2013 with $5.82 billion of loan volume, beating the previous record set last year by over 6 percent.

A total of 766 loans were closed as the program continues to serve as an important source of debt capital to the seniors housing industry. Forty-nine lenders closed loans within the program, but the largest volume of activity was generated by Lancaster Pollard, who closed 118 loans in 25 states totaling $811.7 million or 13.9 percent of total program volume. This was the second year in a row the Columbus, Ohio-based firm led the program in both the number and par amount of loans closed.

“Refinance loans continued to represent the large majority of program activity as property owners took advantage of historically low rates that prevailed through much of the fiscal year,” said Brian Pollard, senior managing director of Lancaster Pollard. “HUD’s record production was particularly impressive in light of a few government hiccups, including a several week delay in passage of a continuing resolution to fund the government in March and the exhaustion of HUD loan commitment authority in September due to program demand. It is estimated that these two events reduced loan production by approximately $300 million.

“Looking forward, we expect overall program volumes to decline somewhat in fiscal year 2014 as much of the economically driven refinance activity is curtailed due to the rise in rates that began in May 2013,” he said. “Approximately 60 percent of the HUD Lean’s volume in 2013 was the refinance of existing HUD loans through the 223(a)(7) program and rate reduction is the primary reason these loans are pursued. However, we expect refinance of properties coming into the program for the first time to remain strong as other features of the program remain appealing.”

According to Pollard, borrowers also recognize that while the ultra-low rates of the past two years may be behind us, rates remain at levels well below longer term historical averages. With economic activity continuing to remain soft, most economists are predicting rates to hold in a range near current levels through 2014.

“Although the government shutdown got the new fiscal year off to a slow start, HUD has resumed production at an elevated pace to clear some of the backlog that was exasperated by the closure,” Pollard said. “Our firm is sitting on the largest pipeline of HUD loans in our firm’s history, with more than $1.4 billion in various stages of processing. This includes much higher volumes of new construction loans. We are hopeful that a reduction in refinance activity will allow HUD to commit greater resources to correcting some of the timing challenges that have plagued new construction programs.

“HUD’s refinance activity over the past several years has substantially broadened the base of organizations that are using its programs and it would be unfortunate if HUD did not become an active participant in many of the seniors housing projects that are being developed today,” he said.

About Lancaster Pollard

Lancaster Pollard helps health care, senior living and housing providers expand and improve their services by providing financial advice and financing solutions. The firm offers a full range of investment banking, mortgage banking and investment advisory services and has one of the largest groups of financial professionals dedicated to health care in the country. As a leading underwriter of bonds and mortgages, Lancaster Pollard has earned a reputation for delivering sound financial advice and the most cost-effective financing options available in the market. For more information, visit www.lancasterpollard.com.