What’s Ahead for Multifamily Financing?
Digested from National Real Estate Investor
What does a moderating multifamily market mean for multifamily financing? For the right investments, ample sources of financing capital are still available, but there are some new considerations to keep in mind.
“Most lenders feel that the multifamily market is at the correct pricing, and will continue to finance multifamily by evaluating each property on a case-by-case basis,” writes Bryan Shaffer, a principal with commercial real estate investment banking firm George Smith Partners, in a National Real Estate Investor article.
However, some lenders are behaving more conservatively, scaling back on high-leverage loans and more cautiously evaluating investments. Borrowers, therefore, will need to make a strong case to lenders about their development.
Following are three factors that multifamily developers should keep in mind as they seek financing.
1. Interest rates will continue to rise. So while borrowers are eager to lock in funding immediately, lenders are moving more slowly than in the recent past.
2. The Dodd-Frank risk retention rules are now in effect, which means that commercial mortgage-backed securities (CMBS) lenders must keep 5 percent of their loans instead of selling them off as bonds. This hasn’t had the negative impact some feared; in fact, it has helped CMBS lenders obtain better pricing.
3. The Trump administration has said it wants to repeal Dodd-Frank. Ending Dodd-Frank could trigger financial deregulation and ease lending restrictions. But even if this happens eventually, it won’t affect near-term lending decisions.