Category: Financing

Multifamily Borrowers Still Have Lots of Options for Constructions Financing

Banks continue to have an appetite for loans on multifamily construction projects.

Investors can still find the financing they need to develop apartment properties.

“If you can get a site to build, there are people who would love to lend on it,” says Bill Leffler, vice president in the multi-housing group of real estate services firm CBRE.

Interest rates remain low and many lenders are willing to make multifamily construction loans. However, these lenders have become more cautious as the cost of construction has grown faster than apartment rents in many parts of the country. Lenders are looking very carefully at the sponsors who ask for construction loans and the markets where they plan to build.

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How the Interests of EB-5 Investors and CMBS Lenders Can Sometimes Be at Odds

Situations where a property changes hands or defaults may prove tricky for situations where an EB-5 project is financed by a CMBS lender.

A notable characteristic of the real estate capital markets over the last 20 years has been the ability to access non-traditional sources of capital for both debt and equity investment in U.S. commercial real estate. One such source is the EB-5 investment/visa program. Created by Congress in 1990, the EB-5 program creates a fast track for non-U.S. citizens toward a green card in return for capital investment in qualifying U.S. domestic businesses and projects. The EB-5 program has garnered its share of controversy for possible abuses, but can also lower the cost of equity capital for a developer.

An often overlooked issue is the interplay of EB-5 financing with the requirements of a CMBS lender, where the developer, EB-5 investor and CMBS lender have objectives that are in conflict, at least initially. In particular, the EB-5 investor may seek decision-making and investment accrual rights not acceptable to CMBS lenders.

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Keep Bridge Loans in Your CRE Finance Arsenal

As banks raise their requirements and construction costs rise, these loans have become an even more useful tool in the value-add and redevelopment space, says Calmwater Capital’s Tristine Lim.

In today’s commercial real estate lending climate, owners and developers increasingly see bridge loans as an essential tool―almost a magic bullet―that can overcome hurdles to remain competitive in the multifamily marketplace. As the cost of home ownership continues to price middle-income earners out of the buyers’ market and into the rental marketplace, multifamily owners continually invest in their properties to attract this group and grow profits.

When it comes to the cost of value-add construction or redevelopment―whether it’s the cost of construction, the need to refinance or consolidate debt, or a desire to buy out other owners―bridge loans have become the weapon of choice in this segment of the market.

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Borrowers Cash in on Competitive Debt Fund Space

Debt funds looking to make bridge loans are facing high competition for deals.

Borrowers are taking advantage of the crowded debt fund space to find some pretty sweet deals on short-term bridge loans.

Competition has heated up in the past six months on financing transitional assets that have a renovation plan or a value-add component, especially those that have in-place cash flow.

“We are seeing some very, very aggressive loans being done,” says Vicky Schiff, managing partner and chief operating officer of Mosaic Real Estate Investors in Calabasas, Calif., a debt fund manager and private lender.

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Bank of America aims to boost homeownership, will give borrowers up to $10,000 to close a loan

Launches $5 billion affordable homeownership initiative

Bank of America is committing $5 billion to help boost homeownership for “low- to moderate-income and multicultural homebuyers and communities” across the country, the bank announced Tuesday.

According to the bank, it plans to commit an additional $5 billion over the next five years to its Bank of America Neighborhood Solutions program, which “will help more than 20,000 individuals and families thrive through the power of homeownership.”

And as part of the program, Bank of America is rolling out a host of new loan programs and options, including grants of as much as $10,000 to help a borrower close a loan.

One of the new options in the Neighborhood Solutions program, which is set to launch in the second quarter, will see the bank giving “eligible borrowers” as much as $10,000 that can be used toward their down payment or closing costs when they get a Freddie Mac Home Possible mortgage.

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Zillow is now a mortgage lender, launches Zillow Home Loans

Rebrands Mortgage Lenders of America to carry Zillow name

Zillow has owned a mortgage company for approximately six months, having purchased Mortgage Lenders of America in November 2018, but now, the online real estate giant has truly become a mortgage lender as well.

Zillow announced Tuesday that it is launching its own mortgage lending operation, which it is calling Zillow Home Loans.

For years, prospective homebuyers could search for a mortgage through Zillow’s site, as lenders paid to have their interest rates and terms listed on Zillow’s mortgage marketplace. Now, they’ll have a new competitor: Zillow itself.

The company is rebranding Mortgage Lenders of America to carry the Zillow name, and will use the lender to finance home buying and selling through its Zillow Offers platform.

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Lower Interest Rates Should Drive More Acquisitions in the Multifamily Sector

As the Fed softens its stance on interest rate hikes, multifamily investors are likely to take advantage.

Borrowers have an unexpected second chance to get low-interest financing to buy or re-finance apartment properties, thanks to growing worries about the slowing U.S. economy.

This month, officials at the Federal Reserve cancelled plans to raise benchmark interest rates in 2019, after a weak jobs report and lowered expectations for economic growth.

So far, the bad news for the broader U.S. economy has been good news for apartment building owners and investors. Interest rates for permanent loans on apartment properties went back to roughly the same level they were nine months ago, in the summer of 2018. Apartment sector experts now predict a flurry of deals, as buyers use low-interest rates to purchase properties and borrowers lock-in low rates on permanent loans.

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LendingTree: Pool of mortgage borrowers receiving interest rates under 5% is shrinking

84.2% of borrowers received mortgages under 5%

LendingTree’s latest Mortgage Rate Competition Index revealed that borrowers with interest rates under 5% slid further for the week ending Feb. 17, 2019.

The report states that for 30-year fixed-rate mortgages, 84.2% of purchase borrowers received offers with interest rates under 5%, falling from 87.8% last week. Notably, this is a decrease from 2018’s rate when 88.2% of purchase offers were under 5%.

The report also highlights that across all 30-year, fixed-rate mortgage purchase applications made on LendingTree’s website, 21.2% of borrowers were offered an interest rate of 4.625%, making it the most common interest rate.

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MBA: Mortgage applications decline as economic uncertainty grows

Applications for 30-year fixed rate mortgages fall 3.7%

Mortgage applications fell even further for the week ending Feb. 8, 2019, according to the newest data from the Mortgage Bankers Association’s weekly Mortgage Applications Survey.

“Application activity fell last week – even with rates decreasing – as renewed uncertainty about the domestic and global economy likely held potential homebuyers off the market,” MBA Vice President of Economic and Industry Forecasting Joel Kan said. “Despite the recent decline in applications, we still expect that the continued strength of the job market and lower rates will support more purchase activity in the coming months.”

On an unadjusted basis, the Market Composite index retreated 3.7% from the previous week.

“The 30-year fixed-rate mortgage dropped to its lowest level since last March and was 52 basis points lower than its recent high last November,” Kan continued. “Government refinances provided a bright spark, picking up over 10%, as both FHA and VA refinancing activity saw increases over the week.”

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Fannie Mae: Tech companies threaten to edge banks out of the mortgage market

“Now is the time for banks to step up their digital game”

In the era of the digital mortgage, banks are facing increased competition from big tech companies looking to flex their muscles in the financial services realm, and they may need to invest more deeply in tech to stay on top.

According to a Fannie Mae’s Perspectives blog post authored by Steve Deggendorf, director of Market Insights Research, banks need to “step up their digital game” and figure out how to streamline financial tasks to enhance the customer experience before big tech beats them to it.

Citing data from Fannie Mae’s National Housing Survey from the third quarter of 2018, Deggendorf said more consumers have expressed a willingness to trust their favorite tech firm with their financial needs, including obtaining a mortgage.

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