12A — August 17 - 30, 2012 — Mid Atlantic Real Estate Journal
www.marejournal.com
M ultifamily F inancing By Mark Scott, Commercial Mortgage Capital A tale of two lending markets
C
ommercial and multi- family mortgage lend- ing rose in the second
sored entities Fannie Mae and Freddie Mac continue to provide stable, sensible non-
Mae and Freddie Mac showed a 50% increase from one year earlier. Multifamily lending,
with one-month LIBOR hold- ing at less than 30 basis points since May 2009, floating rate borrowers are seeing equally low levels. With rates this reduced, borrowers are now willing to swallow prepayment penal- ties in order to lock in histori- cally low rates. For instance, well-heeled borrowers in New Jersey are now much more willing to pay a yield mainte- nance penalty – essentially a form of pre-payment penalty. This means that the lender is entitled to the yield for the entire length of the loan, which
has resulted in penalties in the range of 20% (or more) of the loan value. More importantly, we have seen an interesting dichotomy emerge in the lending market over the past several weeks between agency pricing and life company pricing for lower loan-to-value transactions. In the past, life companies were able to cherry-picking the business they wanted. But this isn’t necessarily the case any longer, namely because their rates are now subject to a floor - a rate at which they will not go below Over the course of the past year, life companies were assuring their policyholders 5.0% rates, but could only lend out at around 4.0%, making it difficult to pay their promised rates. This led to the implementation of a floor anywhere from 3.5% to 4.0%. In truth, life company rates are priced (in terms of spread) as well if not better than the agencies, but Fannie Mae and Freddie Mac will not put in a floor, making them a much more attractive option at the moment. Treasury market fluctuations do affect final pricing with these two lend- ers. It will be interesting to see how the relationship between agency and life company lend- ing plays out over the next few months. Interest rates will also continue to be carefully monitored. Can they go lower? Sure. But that is not neces- sarily a good thing. Change in the interest rate level is ultimately what drives the level of transactions. Also on the banking indus- try’s radar is how the LIBOR scandal progresses (or fizzles) in the coming weeks. The Lon- don inter-bank lending rate is considered to be one of the most crucial interest rates in finance. It underpins 40% to 50% worth of loans and finan- cial contracts in NewYork City alone. Just who has a say in defining the replacement rate will be an important distinc- tion in the coming weeks. Despite some definite eco- nomic question marks, lend- ing continues to flourish and the current low interest rate environment has ultimately fostered increased refinance volume. Mark Scott is principal of Commercial Mortgage Capital. n
quar t er o f 2012, accord- ing t o the M o r t g a g e Bankers As- s o c i a t i o n , which attrib- uted the rise to low inter- est rates and
Currently, multifamily borrowers are seeing some of the lowest fixed rates in history for lower loan-to-value transactions, locking in 10-year rates that begin at 3%.
recourse permanent financing solutions for today’s borrow- ers. According to the MBA’s re- cent Quarterly Survey of Com- mercial/Multifamily Mortgage Bankers Originations, lending on the part of government sponsored enterprises Fannie
as a whole, increased 19% year-over-year. Currently, multifamily bor- rowers are seeing some of the lowest fixed rates in history for lower loan-to-value trans- actions, locking in 10-year rates that begin at 3%. And
Mark Scott
continued stabilization and growth in the commercial real estate markets. Speaking specifically to mul- tifamily, government spon-
In the World of Finance, the Trailing 12 is Crucial $416,600,000 Reasons Our Trailing 12 Month Results Look Solid
Mark M. Scott Principal
FEBRUARY 2011 $18,500,000 859 Multifamily Portfolio Units New Jersey $24,000,000 88 Units Construction Loan New Jersey
$28,500,000 159 Multifamily Units New Jersey
Broker of Record
IN A TURBULENT TIME, CMC DELIVERS FOR ITS CLIENTS. CALL US TO SEE HOW OUR CORRE- SPONDENT AND LONGTIME LENDER RELATIONSHIPS CAN HELP YOU ACHIEVE YOUR FINANCIAL GOALS: MARK M. SCOTT, Principal mscott@newcommercialmortgage.com
APRIL 2011 $15,000,000 160 Multifamily Units New Jersey
$5,000,000 400 Multifamily Units New Jersey
MAY 2011 $4,300,000 Renovation $12,000,000 Construction
Loan 376 Total Units New Jersey
KATE DOLAN HONISH, A.V.P. khonish@newcommercialmortgage.com
AUGUST 2011 $1,100,000 11,200 SF of Retail New Jersey
$62,000,000 368,685 SF Of�ice/Retail Connecticut
$1,400,000 & $10,000,000 80 Total Units NJ & NY Properties
Commercial Mortgage Capital
615 West Mount Pleasant Ave. Livingston, New Jersey 07039
DECEMBER 2011 $14,000,000, 424 units $25,000,000 New Construction Loan 70 Units New Jersey
NOVEMBER 2011 $10,800,000 22 Apts, + 15,669 SF Retail New Jersey
$185,000,000 338 Apts . + 31k Retail/17k Of�ice Space New York
(973)716-0006 Office (973)215-2409 eFax (201)787-7111 Mobile
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