Transcript Generated by AI 00:00 Hey Mark Parkinson back here with Park Place and thank you for joining today. 00:03 We're joined by Eric Howard from Capital Funding 00:06 Group who's gonna give us his monthly update 00:09 on HUDD rates and it sounds like the news is pretty darn good, 00:12 Eric. 00:13 Why don't you start us out and tell us where were HUDD rates 00:15 locking in at the beginning of 2025 and where are we at now? 00:19 Sure. 00:19 Uh, 00:19 thanks for having me, 00:20 Mark, 00:20 as always, 00:20 and uh I appreciate the opportunity to share uh 00:23 any information we can with the sector. 00:25 Uh, 00:25 beginning of the year we were locking rates of around 00:28 6% on what we refer to as the note rate. 00:31 That's before the mortgage insurance premium, 00:33 uh, 00:33 and today, 00:34 uh, 00:34 we're probably around 5.4% on that same note rate. 00:38 So, 00:39 uh, 00:39 one of the things that we've talked about, 00:40 um, 00:41 and, 00:41 and always kind of uh mention is 00:43 there is, 00:44 uh, 00:44 you know, 00:44 some bit of a correlation between the movement in that 10 year 00:47 and, 00:48 uh, 00:48 and where we see HUD rates and when you look at. 00:50 The beginning of the year, 00:51 10 year was probably around 470. 00:53 It peaked in, 00:54 uh, 00:54 in around February, 00:56 and it's come all the way down to about 411 today. 00:58 So we are seeing, 00:59 as we continue to get lower rates, 01:01 uh, 01:01 on the 10 year or the longer end of the curve, 01:03 that is translating into lower hu rates. 01:05 So again, 01:05 probably around 540 today. 01:08 That's great. 01:09 I mean, 01:09 that's a significant drop, 01:10 and I know that there were some loans that were closing, 01:12 you know, 01:12 well above 6% earlier this year, 01:14 so to be at 540 is fantastic news. 01:17 Now, 01:17 I remember as a, 01:18 as a former borrower and owner of facilities, 01:20 we would always worry about locking in and then rates going down. 01:24 And that's missing that. 01:26 If, 01:26 if you do lock in now at this 540 area and 01:30 then rates go down over the next couple of years, 01:32 what are your options? 01:33 So there's a tremendous flexibility, 01:34 Mark, 01:35 in terms of how we price these loans today. 01:37 So, 01:38 we, 01:38 uh, 01:38 there, 01:38 there is an ability to change the prepayment penalties and 01:42 the structure of the loans to give borrowers better flexibility, 01:46 uh, 01:46 really over a 10-year period. 01:48 Whatever fits the borrower's investment horizon, 01:51 but uh there's uh there's an ability 01:54 to the extent that rates decline in 01:56 the 1 to 3 year period. 01:58 The borrowers have an ability to modify their loans, 02:00 which is simply a parallel shift in their rate and to benefit from those savings. 02:04 So one way that we really look at it again, 02:07 most of these holders are 3 to 5 to 7 years if not longer. 02:11 And so if rates stay the same, 02:13 you've got a great 5.4% loan today. 02:15 If rates go down over that period, 02:17 you have an ability to lower your rate 02:19 and still have that great HUD loan in place. 02:22 If rates go up, 02:23 uh, 02:23 you know, 02:23 borrowers look like geniuses 02:25 in a rising rate environment where they've got a 02:26 fixed cost on One of the largest operating expenses. 02:29 Yeah, 02:30 well, 02:30 Eric, 02:30 thanks a bunch for the good news, 02:31 and I know a lot of us missed the 02:34 massive decline in interest rates that we experienced over the last 20 02:37 years and I've talked talked to a lot of operators who, 02:40 whose rates are being uh changed right now in the sevens and the eights. 02:44 The HUD loans are now in the fives and you know, 02:46 it's really time for you to take a strong look at this. 02:48 Thanks much to Capital Funding Group, 02:50 Eric Harron for this update. 02:51 We'll be back with Eric again around Christmas for another 02:54 update and thank you for your support of Park Place.
