From CRE Daily:
Demand for Fannie & Freddie Loans Drops Despite Attractive Terms |
| Multifamily deals are falling apart left and right as investors struggle to secure attractive financing. However, Freddie Mac (FMCC) and Fannie Mae (FNMA) offer active, viable options for savvy investors looking for better terms. Problem is, not too many investors seem interested. |
| Close, but no cigar: While interest rates have run up, Fannie and Freddie haven’t increased the spreads (around 150–200 bps) that they add to their fixed-rate loans. In fact, all-in rates are still as low as 5.00–5.50%. Despite these attractive terms, Fannie and Freddie are unlikely to reach the lending caps set by the FHFA due to low demand for apartment loans. |
| Limited options: In contrast, many banks aren’t lending due to the higher-than-expected risk of their existing loans. Debt funds and CMBS loans are also fairly unattractive right now due to higher interest rates. Developers who need to refinance into permanent debt may face challenges with higher rates when the time comes. |
➥ THE TAKEAWAY |
| Stay on your toes: While rising interest rates and the possibility of a recession have caused a slowdown in multifamily, it’s weathered the storm far better than other CRE sectors. Investors who are able to meet affordability guidelines set by the FHFA should consider capitalizing on Fannie (FNMA) and Freddie (FMCC) financing before those attractive rates actually do go up. |