Recent changes in the language in the AR Agreements reduce confusion, clarify ambiguous statements, and speeds up the process which benefits the SNF provider in acquiring AR financing. The earlier version of the agreement left many deals on hold because of the lack of clarity which discouraged many AR Lenders from making a commitment. The good news is that the new language in the agreement gives providers a much better chance of obtaining AR financing. The changes are open for public comment. However, HUD is allowing deals to close before the end of the comment period if both parties agree to and accept the terms of the new wording.
DEFINITION OF AR LOAN OBLIGATION Excluded many restrictions. The new definition takes a Broad approach which requires AR Loan obligations to be directly related to the benefit of the facility.
CLARIFICATION OF EVENTS THAT TRIGGER A “CUT-OFF” By eliminating many of the reasons that would cause HUD to subordinate its interest in the AR of the provider, the new agreement states that only defaults to the AR loan can cause the AR Lender to cease funding and trigger a cut-off time.
CLARIFICATION OF HUD AND FHA LENDER’S NOTICE AND CONSENT RIGHTS New agreement addresses specific scenarios that have caused problems in the old agreement. The new agreement makes it clear that AR advances that are over the agreed upon maximum commitment amount, but over the borrowing base formula, only require notice and not consent from the FHA Lender or HUD.
MODIFICATIONS WITHOUT CONSENT The new agreement clarifies what modifications can be made to the AR loan documents without HUD’s consent or the consent of the FHA Lender.
These changes are significant and will make it easier for Skilled Nursing providers as well as the full spectrum of Senior Living providers to secure AR financing, a blessing for the Senior Housing Industry in this economy where demand is greater than the supply.