Mortgage bankers are saying that affordable housing is the place to be in 2006. Lenders believe the high-end market is tapped out so they are diverting more attention and funds to affordable housing, said attendees at last week’s Mortgage Bankers Association of America conference in Orlando.
New loans on multifamily properties made up 36% of all commercial mortgage originations in 2005, according to data from the MBAA. Freddie Mac has closed a record $26.2 billion of new multifamily loans in 2005, a 10% increase from 2004, said Adrian Corbier, senior v.p.
Despite that growth, the general consensus among is that the government-sponsored entities have not been aggressive enough in taking advantage of the demand.
More banks are expected to try and increase their multifamily and affordable lending programs. For example, last month HSBC Bank received approval from Fannie Mae to become a Delegated Underwriting and Servicing lender and is trying to expand its multifamily financing, including affordable housing. Kieran Quinn, ceo of Column Financial, said he believes that affordable housing will become a place for lenders to place long-term bets, especially with the abundance of liquidity.
Meanwhile, attendees were discussing how the line between mortgage banking and mortgage brokerage has blurred as the number of shops offering commercial mortgages has increased. There are also concerns that mortgage brokers are becoming less relevant as more public real estate investment trusts increase their holdings, panelists said.
David Roberts, ceo of Collateral Mortgage Capital, said that public REITs are comfortable going straight to Wall Street to finance their deals and don’t need an intermediary. Keeping a competitive edge requires services as simple as providing a fully integrated origination, servicing and pipeline system, added Jonathan Goldman, an executive v.p. at M. Goldman, a mortgage banking company that focuses on New York.
Panelists also discussed a new report from Moody’s Investors Service that cited the $169 billion of commercial mortgage-backed securities issuance completed in 2005. The report also highlights rising loan-to-value ratios and dropping debt-service coverage ratios. Panelists said the current real estate cycle hasn’t suffered from overbuilding but rather overleverage. This has also affected average yields on properties of late, they noted.
The conference, held at the Dolphin and Swan Hotel, was notable for the substantial number of new faces in the crowd, attendees said, explaining that this reflected the increasing capital flows into the commercial real estate sector. The event included performances from Buddy Guy and The Steve Miller Band. Guy, who was inducuted into the Rock and Roll Hall of Fame in 2005, quoted his acceptance speech when talking to bankers after the show. “If you don’t think you have the blues, just keep living. Or stay in the real estate market when interest rates soar,” he said.