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Tax Reform – A/K/A The “Maybe We Should Take a Closer Look at HUD” Bill

Recent legislative events in Washington DC relating to tax reform have made the upcoming holiday season a very challenging time for the capital markets. Whether these events will result in a “stocking stuffer” or the proverbial “lump of coal” remain to be seen, but for every challenge Congress presents, there is a commensurate opportunity, if you know where to look. Let Sims Mortgage Funding help you!

In November, the House of Representatives passed a tax reform bill that terminates after December 31, 2017 the ability to issue private activity tax-exempt bonds for not-for-profit hospitals, seniors housing facilities and nursing homes. The House bill also eliminates tax-exempt bonds for multifamily rental housing. The Senate’s recently-passed tax reform bill preserves private activity bonds for these purposes, but it remains to be seen if the House or Senate will prevail. Fasten your seat belts: The House–Senate conference committee on tax legislation will hold an open meeting this week; their goal is to get a final bill to President Trump by the end of the year.

Considering this legislative uncertainty, not-for-profit healthcare and senior housing, and multifamily housing providers should look at HUD’s mortgage insurance programs – LEAN for healthcare and senior housing, and Multifamily Accelerated Processing (MAP). Both programs are coming off successful years – for the 12 months ending September 30, 2017, HUD closed about $18.5 billion in loans under LEAN and MAP. Moreover, HUD-insured loans are eligible for securitization through GNMA, resulting in long-term taxable financing at competitive interest rates.

Although HUD’s hospital mortgage insurance program has not produced the same level of activity as its LEAN and MAP counterparts, it could see a significant increase in volume if private activity bonds for not-for-profit hospitals are eliminated. Moreover, because hospitals periodically undertake new capital projects and expansions, HUD’s supplemental loan program provides an excellent opportunity for them to remain competitive after they have joined the insured loan portfolio.

Contact any member of the Sims Mortgage Funding team at 201-307-9383 to find out if your project is eligible for one of HUD’s mortgage insurance programs.

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