Agency lenders are making more permanent loans than ever on apartment properties.
Freddie Mac and Fannie Mae lenders are providing the overwhelming majority of permanent loans to apartment properties.
“Fannie Mae and Freddie Mac are probably still the premiere lenders for leveraged apartment buyers,” says Mark Isaacson, co-founder of Redwood Capital Group, a real estate investment management firm focused on the multifamily sector. “Both are very competitive right now.”
Agency lenders are making more permanent loans than ever on apartment properties. Borrowers chose loans from agency lending programs for nearly two-thirds of the permanent financings completed in 2017 despite limits set by federal regulators (loans to certain kinds of apartment properties, including affordable housing, are not limited by the caps).
Fannie Mae and Freddie Mac financings accounted for 60 percent of the permanent loans on apartment properties in 2017. That’s up from close to half (52 percent) in 2015. It’s also not far from the 69 percent share of permanent financing that agency lenders provided in the years after the financial crisis, according to Real Capital Analytics (RCA), a New York City-based research firm.
It’s surprising that Fannie Mae and Freddie Mac have done so many deals. They are restricted by the officials at the Federal Housing Finance Agency who set strict caps on the volume of permanent financing they can provide for conventional apartment properties. However, loans for certain kinds of properties are not limited by these caps, including affordable housing, seniors housing and student housing.