Long-term care providers increasingly turn to Uncle Sam for a mortgage

With credit from private lenders tight, nursing homes are increasingly turning to the federal government for mortgage loans, according to a Thursday article in the Wall Street Journal.

Given that the healthcare payment system is in flux, with the future of the Medicare program considered uncertain by some lenders, some big banks are wary of lending to long-term care operators, the WSJ report said.

Looking at figures from the National Investment Center for the Seniors Housing & Care Industry (NIC), some banks also say demand for nursing home beds decreased over the last seven years, the WSJ article stated. However, January NIC numbers showed nursing home occupancy on the upswing, rising a full percentage point from a year prior.

Regardless of whether the risk is real or perceived, banks' reluctance to lend means operators are opting for low-interest loans insured by the Federal Housing Administration. In 2011, the federal agency insured 458 skilled nursing facility mortgages, which represented a 46% year-over-year increase, according to the Department of Housing and Urban Development. Although taxpayers could bear some costs if nursing homes default on their FHA loans, a spokesperson for the agency said nursing home foreclosures are consistently very rare.

FHA loans generally come with attractive fixed rates and require fewer guarantees than conventional loans, although they come with some additional restrictions.

Loan refinancing makes up most of FHA mortgages obtained by long-term care operators, but the FHA also insures loans for new construction.