Friday, November 4, 2016

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

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

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

Jeanne Peck, Executive Director,

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