In August 2010 Sims Mortgage Funding, Inc. (SMF) closed a new $3,068,200 FHA-insured loan for the Highland Manor Nursing Center, a 120 bed facility in Exeter, PA and a new $2,848,400 FHA-insured loan for Majestic Oaks Nursing and Rehabilitation Center, a 180-bed facility in Warminster, PA. Proceeds from the new loans were used to prepay each project's existing FHA-insured loan, fund repair escrows and deposits to the reserve for replacement funds, and cover transaction and loan closing costs.

Majestic Oaks Nursing and Rehabilitation Center

The owner wanted to capitalize on current favorable market conditions by refinancing their existing, high-interest rate debt. However, since both facilities are over 25 years old, ownership also wanted to ensure that the refinancing would result in adequate financial resources going forward to meet future capital expenditure requirements in light of expected tighter third-party reimbursement. We were able to meet these dual objectives by (1) aggressively pricing the new FHA-insured loans and extending the maturity dates so as to maximize annual principal and interest savings, (2) funding at loan closing additional deposits to the existing reserve for replacement funds and (3) using some of the principal and interest savings to increase the monthly reserve fund deposits.

Highland Manor Nursing Center

The refinance loans were insured under the Section 223(a)(7) program and funded with taxable GNMA mortgage backed securities. Both loans have a 4.20% interest rate; the Highland amortization is 26 years and the Majestic Oaks amortization is 22.5 years. The applications for mortgage insurance were processed under the LEAN program, with approvals obtained in 80 days. The refinancings will generate $685,000 in net debt service savings for Highland Manor over the next 13 years and $524,000 in net debt service savings for Majestic Oaks over the next 10 years.

The Highland Manor and Majestic Oaks loans were the fourth FHA-insured financings that SMF has successfully closed for this client dating back to 2008.