Apartment lending today consists mainly of refinance loans using FHA 223(f), Fannie Mae DUS and Freddie Mac multifamily loan programs. The main issue is that many current loans have more debt than they can refinance today, due to the
SUPER SIZED LOANS of the past five years. Now with higher CAP rates and lower sales prices and more conservative financing these loans are in limbo. Lenders and owners will continue to try to kick the can down the road unless a strong wind blows it into the ditch.
FHA 223(f) allows 80% cash out financing and up to 85% purchase and no cash out loans. This process takes over four months to close and requires the borrower to pay for all the reports and $3 per $1000 exam fee "at risk". This is the most expensive loan process, but the FHA 223(f) provides a 35 year fixed rate loan with a rate currently in the mid 5% range including MIP, with more leverage than Fannie Mae or Freddie Mac. As usual FHA is providing loans in many areas that other lenders are not.
The Fannie Mae and Freddie Mac loan programs can be processed more quickly and also offer low rates in the 5% range. Currently, they are not active in cash out transactions unless the loan to value is very conservative. On a large purchase or no cash out transactions in the 80% or lower loan to value range these are normally the best loan programs to compare against each other.
New construction financing for apartments and healthcare properties is constrained by over supply from single family and condo rentals plus apartment conversions and negative job growth in most markets. The CAP rates in most of the
largest markets is above
7% due to foreclosure sales, lower than normal occupancy and rental rate that have declined. The commercial sales and mortgage volume is at a historic low as most borrowers and lenders are still adjusting to the rapid value declines. Most owner have gone into a hold mode hoping for higher occupancy, rents and lower CAP rates.
Senior Housing Finance using FHA 232 LEAN is very actively providing refinance loans and about three new construction loans hove closed at this time using the FHA 232 LEAN.
FHA 242 New construction for hospitals is active and the new FHA 242/223(f) program may become active once some of the rules are modified. Build America Bonds may be used for some apartment, healthcare and hospital loans, by municipal borrowers and turnkey developers. Non-Profit and For Profit borrowers are taking advantage of the programs.
Rates are near historic lows, but loans are only available at lower loan amounts than a few years ago, with the Federal Debt Clock working overtime
it might be a GOOD time to lock in to a 35 year loan, in the low 5% range, non-recourse and assumable.
