Someone on MSNBC just said that no one is making loans today! The banks are hording money and won't lend to anyone. The commercial real estate journals say that for commercial real estate the only one lending are the Agency lenders; that means Freddie, Fannie and HUD are the only place to get a loan. If you keep repeating something long enough it might become true, but even if it's not true you will start to believe it.

 While the number of lenders for stabilized multifamily properties has been reduced dramatically, they have not all gone away. Some banks have stopped lending as have some insurance companies, but the only ones who have shut their doors on a wholesale basis are the conduit lenders and that happened over a year ago. There are banks that are lending as are some life companies and yes, Freddie, Fannie and HUD. While the overall amount of lending has been reduced it is not driven by lenders not willing to lend.

The issue today is not liquidity (the ability to get loans), but the terms of those loans. The biggest change in the marketplace has been that the types of loan terms offered by conduit lenders are gone. That means, high leverage, non-recourse loans based only on the cash flow of the apartment project with limited analysis of the market and borrower or sponsor. Pretend we are back in the early 1990's, before the rise of the conduits. If you remember the kind of loan you got then, that's the loan you can get today.

The ability to get loans is certainly more difficult for large loans (over $5 million) vs. small loans, but it's not impossible. On large loans there are a number of life companies willing to lend at conservative leverage (60% or so) and Freddie and Fannie are still lending. They will do loans up to 80% LTV, but there are some caveats and for most borrowers I would expect a loan more in the low to mid-70% LTV range. These are non-recourse loans with good rates. These are also long term loans; typically 10 years with longer and shorter terms are available. FHA is still lending and, if you have the time it takes to get a HUD loan they have some of the best options available. Regional and local banks are also still in the market, but many banks have loan limits and as the size of the loan goes up there are fewer and fewer banks who can do the deal. Also, their loans are typically recourse, leverage is still moderate (65% - 75%) and they are looking for strong borrowers willing to establish a relationship.

As for smaller loans, Freddie and Fannie are doing some, but it's been quite a while since they focused much attention on loans under $5 million. As usual the real market is local and regional banks. This is who historically did loans of this size and they are still in business doing these loans today. In the last couple of days I called a number of local banks in Chicago where I live. Most of the banks were doing some level of apartment financing. Half were only lending to established borrower relationships, but they were lending. Some of the remaining banks were lending to any borrower though on a very conservative basis (under 60% LTV). However, there were 6 banks, about 25% of those I called who were actively looking for loans. They were willing to do 70% - 80% financing and with DSCRs of 1.20x-1.30x; pretty typical from a historical basis. Yes these are recourse loans, yes they want borrowers who have experience and financial capabilities and yes they are looking for properties in good condition and good locations. That's just prudent lending. The amazing thing is the rates for these lenders is pretty good, 5.75% to 6.25% for 3 or 5 year loans.

There are funds available to borrow, but it will take some work to shop around to find the lenders who want your business. Once you find the lenders expect that the loan terms are now the bank's terms and not whatever you dictate. The biggest concerns for lenders are that a borrower has experience and financial wherewithal to support the loan if the properties performance weakens. Most lenders want recourse to make sure the sponsor is behind the property. The more experience and financial strength you have the easier it will be to get a loan. Also, the lenders want a loan amount they feel comfortable with. This means a borrower may have pay down their existing loan if they are refinancing or put in more equity than they expected on a purchase transaction.

So if you need financing its available, you just have to be willing to play the banks game. That may be possible if your property has moderate financing or buying a new property, but if you aggressively leveraged the property in the last few years you will either have to stay with your current loan, put in more equity or work something out with your bank.