SEPTEMBER 2016 FINANCING UPDATE
RATES ARE AS GOOD AS THEY HAVE BEEN IN A LONG TIME!!!!!!!!
- FHA multifamily rates, FNMA, Freddie Mac and Insurance rates have finally broken through the 4.0% threshold. All in FHA is as low as 3.50% fixed for 35 years with 60 basis point MIP premium.
- Overall, spreads are beginning to constrict and maintain as the 10 Year Treasury has maintained a new lower-level trading range between 1.50% and 1.60%.
- Spreads on the lower end of the GNMA pricing matrix are very, very tight.
- Bank participation for long term loans has been waning as bank portfolios are filling up. Regulators will tighten on the banks more next year for commercial real estate, which will result in more reliance on the capital markets.
- The final Dodd-Frank ruling requires sponsors of asset-backed securities to retain at least 5 percent of the credit risk of the assets underlying the securities and does not permit sponsors to transfer or hedge that credit risk during a specified period. The final rule applies to all other classes of asset-backed securities issued on or after December 24, 2016. CMBS spreads could widen with this additional capital requirement.
As of the date, here is the pricing hierarchy of non-recourse cost of money, beginning at the least expensive to most expensive. 10-year fixed rate pricing and higher is measured, as adjustable pricing ranges from 250 BP’s over LIBOR and higher.
AS OF EARLY September 2016,
- FHA Pricing: 2.90%, 35-year fixed rate fully amortizing. MIP fee of 0.60% on most product types. All in rate is effectively 3.50%. Spread is approximately 140 over 10 YR Treasury. Maximum leverage is 85% for non-cash-out and 80% for cash-out.
- Insurance: 30 year fully amortizing at 3.75% range, 65% to 75% LTV. Minimum loan amount of $8 million. 10-year term is 3.65%. Interest only periods are available.
- Credit Tenant Bond Financing: Approximately 185 BP’s over corresponding Treasury tied to lease term. 3.85% rate. AAA rated pricing.
- Agencies: As low as 3.85% fixed range at max LTV ratio of 80%. Spread is approximately 230 BP to 240 over 10 years. 65% LTV ratio reduces rate approximately 20 BP’s. We recently locked in a C class 80% LTV ratio deal at 4.05% fixed for 10 years with I/O for 3 years in the small loan platform, which is very competitive for loans below $5 million.
- CMBS: 4.0% fixed at 75% LTV ratio. Spread is approximately 245 to 250 BP’s over 10 YR Treasury.
- Hospitality Financing: Rates are approximately 4.25% fixed for 10 years with CMBS deals. Spreads are wider by approximately 25 BP’s versus other major product types.
- HUD properties are able to have MIP reduced if your property passes the “Green” initiative. This entails having your property rated after an evaluation of tenant utility bills. The MIP fee reduction is 25 BP’s. This reduction can only be achieved with a refinance of the HUD loan, either through an A7 process OR a new refinance. CALL OR EMAIL US WITH ANY FURTHER QUESTIONS.
- Many lenders will vary prepayment penalty options, choosing from specific step-downs versus yield maintenance. Specific step-downs typical cost approximately 15 BP’s in rate.
Thank you for your time reading this email. Your time and consideration are important to us. Our goal is to add value, and hopefully from reading this email, you have received it! Have a great day, and as always, please feel free to reach out to us anytime to discuss anything you may have interest of knowing or researching. Let’s have a discussion!!!!
Call Scott Taccati at (706) 615-3030 for non-Florida territories.
Call Brent Shryock at (904) 309-4111 for Florida territories.