6A — November 11 - 24, 2016 — Financial Digest — M id A tlantic
Real Estate Journal
www.marejournal.com
F inancial D igest
By Mark Scott, Commercial Mortgage Capital The pull back is well underway
I
rationale. Many of the in- dustry reports indicate thou- sands of units coming online
construction, but to pullback on fully leased, stable, low per unit values appears to be foolish at best. Occupancy rates are near 100% in B and C grade apartments throughout northern NJ. A reason received from lenders is that the market for multifamily is so competi- tive that they do not want to loan at extremely low spreads and low rates that have been in the market this past year. They would rather lend on commercial properties, such as office and industrial, where they could get greater spreads. In my humble opinion, those
greater spreads come with greater risk. Refreshingly, not all lenders have exited the multifamily market. After a more exhaus- tive search than usual, we have been able to obtain sever- al competitive bids on deals we have been shopping this week. But the market is tightening. Reasons: The election? End of year slowdown? Lender having reached or exceeded their 2016 allocations? Risk aversion? Time will tell. Mark Scott is principal of Commercial Mortgage Capital. n Appraisal Institute concerned with Freddie Mac policy changes CHICAGO, IL — Cit- ing similarities to previous policies that “turned out to be disastrous for the entire economy,” the nation’s larg- est professional association of real estate appraisers today expressed “serious concerns” with changes to Freddie Mac ’s Loan Advisor Suite. Under its new policy an- nounced Oct. 24, Freddie Mac will waive appraisals in lieu of an “appraisal alternative” in a host of situations, includ- ing first-purchase loans. The Appraisal Institute’s Oct. 31 letter to Federal Housing Finance Agency director Mel Watt asked Freddie Mac to re-evaluate the new policy. “The policy change by Fred- die Mac appears to be oriented to purchase-mortgage transac- tions or transactions with the highest risk to the agency,” the Appraisal Institute said in its letter. “It has become standard practice to obtain a complete interior inspection appraisal to understand things such as property condition.” The Appraisal Institute’s letter noted that it has taken many years for the mortgage finance sector to recover, stat- ing: “Today, there is little doubt that markets are more secure because of most first- purchase mortgages utilizing real estate appraisals as a fun- damental tenet of residential mortgage risk management,” the Appraisal Institute’s let- ter said. “Reducing appraisal requirements sends the wrong signal to mortgage loan sellers about the importance of risk management practices.” n
mentioned in the Mid Atlantic Real Estate Jour- nal several months ago
shocked to hear that many smaller balance sheet lenders which I contacted have exited
that at least one o f our big regional lenders for the state of New Jersey n o l o n g e r wanted to do mu l t i f am - ily construc- tion and was
“I can understand lenders want to pull back on new construction, but to pullback on fully leased, stable, low per unit values appears to be foolish at best.”
throughout the metropolitan region. In some places, it is truly amazing, however “the herd effect” has begun. This past week, I was promoting the financing of two B grade “bread and butter” multifam- ily properties in solid locations in NJ. I was amazed and
the multifamily market or se- verely cut back. B grade multi- family apartments are primar- ily leased by those who “need” to rent. Most of the new apart- ments that are coming online are rented by people who “want” to rent. I can understand lend- ers want to pull back on new
Mark M. Scott
pulling back on newmultifam- ily lending and only lending to their premier existing clients. I can understand this
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