The lending market remains mysterious for those outside it. We gathered industry leaders last week at Bisnow's Multifamily Annual Conference South to pick their brains: panel moderator BKD Director Scott Humphrey, Pillar Director Colin Whittier, Allied Orion Group CIO Ricardo Rivas, Hunt Mortgage Group managing director Vic Clark and Freddie Mac senior producer Matt Brodsky.
Increased Lending Caps
On May 4, the Federal Housing Finance Agency increased the lending caps for Freddie and Fannie from $31B to $35B. Since then, Matt says they've seen record inflows. Freddie is getting aggressive in the uncapped space also, especially targeting workforce housing. Colin says Fannie has stepped on the gas quite a bit, too, allowing it to widen its focus in uncapped markets and broaden delegation of student and military housing.
Loan To Cost Ratios
Due to challenging loan to cost ratios, investor profiles have changed, Ricardo says. Especially in more volatile areas (we mean you, Houston), Allied Orion has had a minimum of 65% or 70% LTC, which makes investor returns tough. Freddie has a lease-up program where it takes out properties that are still in lease-up—both acquisition and refinance—and requires 15% cash equity still remaining in the deal.
Impact Of Brexit
Vic says the UK voting to leave the EU really didn't have that much of an impact on CRE lending—just a bump before leveling again. The average all-in rate was only three to five bps higher or lower, depending on where the Treasury was since Brexit. No one's predicting that rates are going to skyrocket, Vic says.
Financing Affordable Housing
If you're looking to find affordable housing deals, go with agency programs with some good uncapped business, Ricardo advises. This election will prove pivotal for the Low-Income Housing Tax Credit program. With Republicans trying to kill the program and Democrats trying to increase its funding by about half, our new president will likely make the final call on LIHTC funding.
Advice For Lenders
Put yourself in the shoes of the borrower, Colin says. There's no such thing as a down-the-fairway deal anymore and banks account for a much bigger percent of the lending pie these days. Customer service goes a long way.
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