Capital Corner: Lending and Forbearance Updates

During these ever-changing market conditions, our debt, equity, and investment sales experts are in continuous contact with our capital relationships including insurance companies, GSEs, and CMBS to develop strategies and executable options available to you, our clients. We offer this lender update to assist your business planning and decision making, and encourage you to call us for details about your specific situation.


Agencies (Fannie Mae, Freddie Mac, FHA/HUD):
The government-sponsored agencies are processing a significant amount of refinance business. All-in rates on Fannie Mae and FHA loans significantly decreased in the last week. Fannie and Freddie loan pricing and structures are generally in the 3.50-3.90% range contingent upon loan specifics. Floating and fixed-rate executions are still being requested with the majority seeking fixed. 

FHA remains committed to being a consistent provider of capital during all cycles in the market. The appetite for both new construction (221d4) and refinance/acquisition (223f) transactions remains steady for FHA. FHA will quote deals that are leased up and less than three years old, per an announcement made in February. FHA rates began to contract last week, and the trend is continuing this week. 223f rates are in the 2.80% range and a 221d4 transaction would be approximately 3.50%.

For loans in the application process, it is more important than ever to be in contact with your NorthMarq team to ensure that you have the right strategy in place to close as expected. Escrow requirements have become popular as lenders try to brace for short-term income interruptions and model a loan that can stand-up to the current market challenges. It is critical to stay apprised of the evolving financial landscape.   

Life insurance companies:
Many insurance companies are still seeking new loan opportunities even if some are pausing at times for price discovery given the volatility in the market. All-in, 10-year rates vary widely as we have locked rates as low as 2.75% and had quotes as high as 4.50%. Generally, most groups are in the 3.50%-4.00% range. Most major property types are still being considered, with an exception for hospitality.  

Most CMBS lenders are offering to negotiate, underwrite and prepare loans for a possible CMBS execution. Having the loans prepared for when there is more clarity on the market will allow some property types to engage in a refinance process when other lending options might not be available.

We are aware of the impact that shuttered tenant operations and furloughed renters will have on your business and are evaluating all of the options to help guide you through these challenging times. As you read information coming from many sources, we encourage you not to assume a one-size-fits-all approach will apply to you. 

Forbearance might not be the right fit for your investment situation. If you are evaluating it, remember that it will have restrictions and payback requirements that may impact your normal business plan. We know the following to be true:

  1. Overall, we recommend that you work to remain in good standing with your lender by making the April 1, 2020 payment. This will be important and will help get a lender to work with you and your situation more readily. 
  2. You should document the current changes in your property and how you are covering first losses. 
  3. Be prepared to sign a pre-negotiation letter.

Forbearance is available to properties with a Fannie Mae or Freddie Mac performing multifamily mortgage significantly impacted by the coronavirus national emergency. However, borrowers must suspend all evictions for renters unable to pay rent due to the impact of coronavirus. The eviction suspensions are in place for the entire duration of time that a property owner remains in forbearance and until the relief provided is paid back. Currently, we see the agencies trying to be paid back within 12 months after the forbearance period, but circumstances will determine the final deal. 

Life Insurance Companies:
In terms of loan modification and forbearance requests, borrowers will need to prepare detailed financials under the terms of the loan agreement. Please reference the email sent from our Loan Servicing department for additional recommendations to streamline communications for the next few weeks. 

In closing, we are encouraged by the commitment from lenders to continue to transact business. We are also committed to supporting you and your business, no matter what level of activity you are considering. Our relationships and market expertise are a valuable resource that we want to share with all of our clients to navigate this volatile time. We are here to help.

Please contact a local NorthMarq office for specific guidance.