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| Jeanne Peck |
Chicago, IL – Real Estate
Capital Institute notes the 20,000-Dow-threshold has started 2017 on a hot
streak. Realty capital markets, however,
are more subdued as
mortgage rates are
slightly lower than the beginning of the year.
After bouncing about a quarter
point during the month, overall long-term rates are certainly higher than
pre-election figures, but still within a comfortable
range. Lenders are flush with funds per the
following popular sources:
Agency/FHA: Freddie/FNMA combined agency loan production
for last year was
at a record level - in
excess of $110 billion. Significant
liquidity
assures mortgages spreads
will be tight and perhaps even compress more as
the year progresses. On the legislative front, the new administration
is
targeting tax reform,
potentially impacting tax-credit driven deals.
New
construction/perm debt
combinations (e.g., FHA/HUD 221(d)4) gain more
popularity as many banks
pull back from new multifamily construction
fundings.
Life Company: Similar to agencies, mortgage spreads are on
an even course.
LifeCos actively in the
market with funding allocations similar to last
year. Ideal underwriting focused on 65% or less
leverage in return for very
attractive pricing of 150
to 180 basis points over treasuries.
Unique to
this funding sector,
fixed-rate forward-delivery loans reach out to a year
at premiums of three to
five basis points per month after the initial ninety
days.
CMBS: Securitized mortgage spreads, too, have been
stable during the past
few weeks. Risk Retention rules governed by the type of
risk compliance
chosen by individual
conduit lenders. Larger financial institutions issuing
conduit debt, and
investing in each layer of the debt stack ("Vertical
Strip"), appear
unaffected. Alternative risk compliance
formats
("Horizontal
Strip") targeting the highest risk portions of the debt are
still defining
securitization strategies.
Bank: Basel III regulatory requirements postponed
to late in the first
quarter, giving banks
breathing room for regulatory negotiations on some of
the more onerous
provisions. Even after considering
regulatory issues,
construction funding is
challenging, given the new inventory pipeline in
most markets. Loans are limited to lower leverage and
debt-yield thresholds
with strong sponsorship,
mostly for existing clients.
Ms. Jeanne Peck of the Real Estate Capital Institute, advises,
"Most of the
attention is diverted from
rates to how Trump administration will deal with
loosening tax and
financial service regulations. Lenders
and borrowers
alike want more policy
clarifications in order to formulate investment goals
and objectives."
For a complete copy of the company’s news release,
please contact:
Jeanne Peck, Executive
Director
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