RECI Finds Uncertainty Among Treasury Rate and Mortgage Spread Spikes

Jeanne Peck

Chicago, IL – Real Estate Capital Institute reports recent treasury rate and mortgage

spread spikes show a combination of capital market uncertainty on monetary

policy issues, the election and overall investor fatigue.  Yields are

globally rising as investors reevaluate how much longer current monetary

programs will work for controlling economic stimulus.  Pricing translates to

at least a quarter higher than a month ago. In fact, treasuries jumped to

the highest level since May.  Emerging commercial mortgage pricing trends

include:

Stubborn Rates:  Bond markets flattening out.  Evidence mounts for

policymakers to stay within the neutral zone, at least for the short term.

While inflationary pressures overshadow the American economy, latest figures

favor key cost indicators staying in check.  Global markets still stymied by

lackluster performance, keeping domestic rates tamed.  Current yields, for

the most part, factor in at least one quarter-point rate hike.

Risk Retention Ignited:  This month Wall Street issued a considerable new

batch of conduit loans.  Issuers continue to shuffle pipelines ahead of

impending risk retention regulations taking effect on December 24, 2016.

After maintaining a steady rally over the past six months, new issue spreads

have begun to drift slightly wider.  With stringent loan loss requirements,

smaller conduits exiting the markets, in favor of larger financial

institutions that can absorb risk.  The net effect equates to about 15 bps

widening since September.

Agencies Active:  Freddie and Fannie are managing their caps well and are

still actively lending on multifamily assets. Both Agencies have released

competing green programs that offer significant benefits in rate and

proceeds should the property qualify. These programs can reduce interest

rates by up to 40 bps. 

Forward Planning:  With more flexible [balance-sheet] internal allocation

goals, based compared to other permanent lenders sources, LifeCos budgeting

funds for 2017. Key areas of competition include lower rates and

forward-rate locks of up to one year.

The Real Estate Capital Institute's director, Jeanne Peck, boasts "It's a

double header ball game -  as the current economic recovery rolls along, at

least for another year or so.  Simply too much capital in the system.

Expect more of the same market behavior, regardless of who takes the White

House."

For a complete copy of the company’s news release, please contact:

Jeanne Peck, Executive Director, director@reci.com

www.reci.com