Multi-Housing News - July 2009 - (Page 10)

Investment Tougher Standards Mortgage bankers describe today’s rigorous examination of loan applications By Keat Foong, Executive Editor In the current economic environment, many borrowers are concerned about obtaining refinancing as well as permanent and acquisition financing. These loans are obtained nowadays primarily through Fannie Mae and Freddie Mac, which have both toughened standards. Tighter underwriting is manifesting itself in a variety of ways. MHN talked to three Fannie Mae/Freddie Mac-approved lenders for their views on the new underwriting criteria. As David Durning, senior managing director of originations at Prudential Mortgage Capital Co., says, “[Lenders’] reaction to the uncertain times we are seeing in the real estate markets in terms of property operations and valuation is to be more conservative in how loans are underwritten.” to the non-recourse provision now is if the borrower intentionally allows the property to go into disrepair. This includes, for example, the cannibalizing of units for washers and dryers without replacing them, he warns. Fannie Mae and Freddie Mac are now “very focused” on making sure properties are run well, says Cannon. Marginal properties, and older properties that have not been kept up-to-date as much, are more difficult to get approved, Cannon says. Properties can be older, but for example, the systems, such as HVAC and flooring, need to be up to date and in good order. It is definitely more difficult to get deals approved today, says Cannon, compared to even six months ago. Properties Should be Well-Maintained Capmark Finance Inc. Horsham, Pa. Multifamily Originations Volume 2009: Approximately $744M (through March 2009) Do you Service All Your Loans Originated?: Yes Active Regions: National Preferred Types of Apt. Properties: All Sources of Multifamily Financing Provided: Fannie Mae, Freddie Mac, FHA-Insured Financing, Private Investors, Insurance Companies How Lenders Drill Down on Income-Expense Items spreads are falling, the bad news is that credit terms are tightening.” The GSEs, explains Cannon, are imposing tighter credit controls. This credit tightening takes a variety of forms. Very rarely are benefits such as interest-only and cash-outs for refinancing provided today, he says. Fannie Mae and Freddie Mac are also becoming pickier in terms of the asset quality and the markets in which they choose to invest. And there is a focus on the age of the property, the amortization and collection of placement reserves. “If you can obtain a Fannie Mae or Freddie Mac execution, the rate and spreads are very attractive. However, the credit terms have been tightened over the past several months, and we do not think they will improve in the next few months,” says Cannon. As an indication of the more stringent credit standards, “waste” has been added by Fannie Mae to the “bad boy” non-recourse carve-outs. The GSE loans are non-recourse, but an additional exception NorthMarq Capital Minneapolis Multifamily Originations Volume 2009: Approximately $3 Billion Do you Service All Your Loans Originated?: Yes Active Regions: All Preferred Types of Apt. Properties: 90 percent occupied or better Sources of Multifamily Financing Provided: Fannie Mae and FHA nationwide through AmeriSphere Multifamily Finance, Freddie Mac in all NorthMarq locations, Life Insurance Companies in all NorthMarq locations There is both good and bad news in the financing markets for borrowers, says John Cannon, executive vice president at Capmark Finance Inc., one of the largest agencies, as well as FHA, lenders. “The good news is that spreads are falling—and they have been for the last few months,” Cannon says. “But while Competition among lenders today is based on the ability to provide the highest loan proceeds, says Sue Blumberg, senior vice president, managing director of the Chicago office of NorthMarq Capital. 10 July 2009 | Multi-Housing News | Official Publication of Multi-Housing World

Table of Contents for the Digital Edition of Multi-Housing News - July 2009

Multi-Housing News - July 2009
Contents
From the Editor
Executive Insight
Market Pulse
Profile
Market Report
Management
Case Study: Luxury
Finance
Kitchen & Bath
Products & Services
Tech Trends

Multi-Housing News - July 2009