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Multifamily Loans in the Age of COVID

By the end of March, we saw CRE lending come to a grinding halt as COVID took hold of the world. Fortunately, in the last few months the lending market has regained a level of fluidity. Although the market is starting to normalize to some extent, the landscape has changed indefinitely. Here are a few insights that may be useful for both borrowers and CRE professionals: What has changed? The players: some lenders are still not quoting deals. The bank that gave you a loan eight months ago may reject a deal you send them today. Stricter underwriting: prior to the pandemic, a 1.20x DCR was the industry standard for multifamily properties. Now, it seems that 1.25x is the new norm and some lenders are even going as high as 1.35x. LTV constraints have changed as well - apart from agency debt, it is hard to come quotes exceeding 65% LTV.  Documentation and due diligence: lenders are digging for more information before signing up a deal and during closing. Requests for delinquency reports detailing missed rent payments is now par for the course. Monthly or bi-weekly collection reports and profit and loss statements may have to be submitted throughout the closing process. Terms: it is much harder to come by a non-recourse loan nowadays, and many lenders are requiring a 6-12-month payment reserve to ensure the borrower does not default in case a tenant vacates or stops paying rent.   Some silver linings Multifamily is still a safe asset class. Any lender......
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Green-Certified Multifamily Sees Fannie Mae Drop Rates

Green-Certified Multifamily Sees Fannie Mae Drop Rates
Fannie Mae proclaimed their commitment to a more eco-friendly and green multifamily industry by announcing in February that they will be offering special, discounted or lower interest rates on any of the loans they make to any certified energy-efficient multifamily properties. The idea of offering deep discounts to property owners who are willing to improve their properties’ energy performance doesn’t just make for a more sound investment in our future; this move is also designed to see the overall quality and affordability of these multifamily properties improve in the long run. Fannie has agreed to lower the interest rates on any loans they make that either refinances, acquires, or is made as a supplemental multifamily mortgage loan on any qualifying green property by 10 basis points. Fannie’s new program is designed to push multifamily builders and investors to seek more energy efficient alternatives for their new and existing projects. This push is seen as a much needed incentive for decision makers who might be on the fence about building or converting over to green energy and efficiencies. This comes at a time when gaining green certification means becoming eligible for a number of green funding opportunities and a variety of rebate programs designed to help balance the additional costs of executing any new energy conversions. Because of this cost offset – which can sometimes equal the total cost of the conversion - more commercial investors and owners are choosing to gain Energy Star, LEED, and/or one of the other certifications available for ene......
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