With 10-year Treasury rates below 2%, borrowers that qualify for Fannie Mae (and Freddie Mac) multifamily loans are seeing loan quotes at levels not seen since the formation of the Fannie Mae multifamily program in the 1950s.
ValueXpress is active in both the Fannie Mae Delegated Underwriting and Servicing program for larger loan balances and the Fannie Mae Small Balance Multifamily Loan program. Surprisingly, the benefits of lower rates are flowing to the small balance borrower as well as the borrower with larger loan balances. For example, ValueXpress recently placed a borrower under application for a $3-million Fannie Mae Small Balance Multifamily loan in Virginia. The borrower was pleasantly surprised to find out that the indicative rate for an 80% LTV, 10-year fixed-rate loan paid on a 30-year amortization schedule would be under 5%. Needless to say, the borrower said to step up the underwriting pace.
“The timing for a Fannie Mae loan has never been better,” commented Michael D. Sneden, Executive Vice President of ValueXpress. “However, it has become a challenge to explain to CMBS conduit borrowers why multifamily conduit loans are at 6%, while Fannie is sub-5%. Once I explain that the market perceives Fannie to have U.S. government credit support, while CMBS has purely private credit market support, borrowers begin to understand why there is such a large rate differential.”