By Peter Margolin (top right photo)
Peter Margolin is a Director in Arbor's full-service Deerfield, IL office. He can be reached at 847-597-7031 or at pmargolin@arbor.com.
As the landscape of small balance multifamily lending continues to evolve, we have seen Fannie Mae provide liquidity into a space vacated through the loss of major players like IMPAC, LaSalle Bank and most recently IndyMac.
Further, several regions of the country have been hit with tougher guidelines.
Peter Margolin is a Director in Arbor's full-service Deerfield, IL office. He can be reached at 847-597-7031 or at pmargolin@arbor.com.
As the landscape of small balance multifamily lending continues to evolve, we have seen Fannie Mae provide liquidity into a space vacated through the loss of major players like IMPAC, LaSalle Bank and most recently IndyMac.
Lending nation
wide, these three companies funded billions of loan dollars annually. While a few new players have been added, the loan volume of the replacement lenders is significantly lower that of the ones that have been lost.
wide, these three companies funded billions of loan dollars annually. While a few new players have been added, the loan volume of the replacement lenders is significantly lower that of the ones that have been lost.Now, borrowers are looking to their local banks and Fannie Mae through the 3Max® program to pick up the slack.
The basics of the 3Max® Program are as follows:
Loan Amounts - $500,000 to $3 million ($5 million is select markets)
Loan Term – Up to 30 years
Loan Amortization – Up to 30 years
Minimum DSCR – 1.20X
Loan Term – Up to 30 years
Loan Amortization – Up to 30 years
Minimum DSCR – 1.20X
Maximum LTV – 80% (75% for five-year term)
Recourse – All loans recourse e
xcept in specific markets
xcept in specific marketsInterest Rates – Fixed or ARMs available
Prepayment Penalty – yield maintenance or defeasance (Fixed declining available for ARMS only)
To protect the credit quality of considerable new loan originations in the small balance arena, Fannie Mae has instituted several changes to the loan criteria. These have included loan-to-value adjustments on five-year term loans, and the change to recourse from non-recourse nationwide.
To protect the credit quality of considerable new loan originations in the small balance arena, Fannie Mae has instituted several changes to the loan criteria. These have included loan-to-value adjustments on five-year term loans, and the change to recourse from non-recourse nationwide.
Further, several regions of the country have been hit with tougher guidelines. The states of Michigan, Ohio, Indiana, and the Orlando and New Orleans metro areas are all limited by Fannie to 65% loan-to-value, 1.35 debt service coverage and full recourse regardless of loan size.
In light of the credit crunch in the capital markets, Fannie Mae is still looking for strong loan originations in the small balance multifamily space.
We can expect continued revisions to the guidelines in order to effectively control the volume of those transactions and the quality of the borrowers behind those loans.