HUD's consolidating and the agencies are reducing lending volume, but multifamily shows no signs of slowing as other lenders enter the mix with their gloves up and competitive rates to match. (Get ready for some black ink and black eyes.)
Berkadia Commercial Mortgage's Chicago-based team--SVP Len Deering, SVP Tom Sigrist, and VP Paul Matusiak--just closed a total of $46.4M through HUD. The refis, for apartment communities in the Chicago suburbs (Wheeling and Lisle, below), are evidence of a return to the fabled 80% LTV (even Bigfoot was shocked). But it doesn't stop there: HUD can even go to 83.3% LTV for a no-cash-out refi, they tell us. Don't worry: the market is neither on the verge of getting frothy or overleveraged. Fannie and Freddie have had very low delinquency ratios and claims on multifamily in the past few years, and so has HUD, thanks to a more conservative lending structure.
But the demand is very real, with new buyers complaining of cap rates lower than they'd like—which is the proof in the pudding, they say, because caps normally rise in a direct ratio to interest rates. As Fannie and Freddie reduce lending volume 10% each year going forward, life companies and Wall Street will push for market share, the team tells us. HUD doesn't have a cap on lending volume, but they do adhere to an annual budget and have lowered their underwriting parameters over the last couple of years due to volume, they say.
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