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By Rick Wolf
Senior managing director
Optimism for Multifamily Lending Is in the Air
Challenges and uncertainty are inspiring innovative solutions
This year likely will be a defining period in multifamily lending, building upon the past several
years of growth to reveal opportunities for industry innovation and breakthrough partnerships.
And yet, there is no lack of chal-
lenges to overcome in order to con-
tinue generating positive multifamily
lending volume. Commercial lenders
are facing the threat of new volume
restrictions for Fannie Mae and Freddie
Mac government-sponsored enterprises
(GSEs) now under conservatorship, with
their fate potentially hanging in the bal-
ance. In addition, there’s the ominous if
and when “taper” question, and a spate
of residual mortgage-security settlements
from the crash in 2008. In the meantime,
homeownership levels remain stagnant
and the demand for apartment rentals is
gaining steam once again.
It will be interesting to note how the
multifamily sector plans to catalyze the
following conditions for future growth.
One particularly interesting reentrant
to the multifamily lending landscape is
commercial mortgage-backed securities
(CMBS). The CMBS issuance volume for
conduit lenders topped $85 billion this
past year, a 77.9 percent increase compared to 2012. This renaissance proves
that investor demand for mortgage securities remains high, reflecting renewed
confidence that stricter underwriting
standards will make conduit lending an
even stronger channel than in the past.
Although the GSEs remain significant
players in multifamily lending, regulators will continue to debate what their
role should be in mortgage finance
going forward. In the meantime, lenders must anticipate potential change,
and are exploring alternatives to continue providing palatable financing
solutions for borrowers. One of these
is the development of proprietary loan
products that leverage funds from institutional investors, such as pension
funds. And although the Fannie Mae
Delegated Underwriting and Servicing
(DUS) franchise has kept private capital in the lending market, new players
are entering the space to share both
the risks and rewards of the U.S. mortgage market.
Another growth strategy taken on
by some multifamily lenders, though
not necessarily new, is regional targeting. This year, several “undiscovered”
regions may prove to be ripe for lending activity as multifamily demand
increases overall. According to Reis
Inc., the national vacancy rate fell to
4. 2 percent in this past third quarter. This rate is the lowest since 2001,
with New Haven, Conn., and Syracuse,
N.Y., posting rates of 2 percent and
2.1 percent, respectively, in the past third
quarter. At that time, 11 markets had vacancy rates lower than 3 percent, with
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Rick Wolf is senior managing director at
Greystone, a leading national multifamily mortgage lender. Previously, he worked at Fannie
Mae for 11 years as vice president responsible
for small-loan production, negotiated pools
and large national accounts. Wolf also worked
in securitization groups at Merrill Lynch and
KPMG. He holds an MBA in finance from Florida
State University and a bachelor’s in economics
from the University of Miami. Reach Wolf at