In golf it is called a mulligan.
At the playground or school yard it is called a do-over.
At the US Department of Housing and Urban Development (HUD) it is called an Operating Loss Loan (OLL).
Under the Section 223(d) program, HUD allows owners of HUD-insured housing and healthcare projects to recoup start-up losses with Supplemental Loans that covers losses for any consecutive 24-month period within the first 10 years of operation.
However, the program has been modified – temporarily, through September 30, 2021 – to include hospitals and healthcare facilities insured under Section 242 and 232 that have incurred losses due to the impact of COVID-19 on their operations. The modification was in response to the Proclamation Declaring a National Emergency Concerning the Novel Coronavirus Disease (COVID-19) Outbreak declared by President Trump on March 13, 2020.
To qualify, a hospital or healthcare facility must demonstrate that it was “financially sound” prior to the date of the Proclamation and that it has exhausted all other forms of assistance that was available to it. HUD defines financially sound as: a) having at least a debt service coverage of 1.0 times for the 12 months ending February 29, 2020 and b) being no more than 30 days delinquent on a mortgage payment for the six months prior to March 13, 2020. HUD will rely on a Borrower Certification that it has exhausted all other forms of assistance, with the Certification specifically identifying all resources and sources of funding it has received since March 13, 2020.
The OLL will be the lesser of: COVID-19 related temporary losses or additional expenses expected be incurred during the impact period starting on January 1, 2020 and ending December 31, 2021; or, one year’s debt service on the existing HUD-insured loan, including mortgage insurance premiums, taxes, insurance and reserve fund for replacement deposits. For hospitals mortgage reserve fund payments also may be eligible.
Applications for COVID-19-related OLLs must be submitted by August 30, 2021 to allow sufficient time for processing. The term of the OLL cannot exceed the remaining term of the current HUD-insured loan.
OLLs may provide hard-pressed hospitals and healthcare facilities with access to low-interest rate capital under expedited processing protocols – contact us for additional information about the program.