07 Jan Wall Street Sees Promise in Multifamily Loans

According to the Wall Street Journal, Fannie Mae and Freddie Mac are finally getting some private-sector competition in the business of financing loans in the debt market, at least in multifamily housing.

Congress has been urging private capital to become the primary source of funding for real estate. On Wall Street, lenders are getting more aggressive bidding on multifamily loans. Costs have been cut to the lowest in more than four years, getting closer to Fannie and Freddie rates.

The report revealed also that CMBS lenders seek to regain a foothold in the multifamily sector of commercial real estate that has evaded them since the financial crisis. Multifamily loans went from 19% to just 6.6% of CMBS deals this year.

CMBS risk premiums have dropped as low as 0.83 percentage point this month, closer to lending packages offered by Freddie Mac and Fannie Mae, whose similar bonds demand yield premiums of about 0.5 point.

CMBS lenders may favor interest-only loans: typically where Fannie and Freddie have really gotten strict.

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