A lot of activity abounds in the financing markets. Over the past couple of months, we have seen spreads for GNMA securities (HUD financing) drop to as low as 90 basis points over the 10 Year Treasury to the present level of approximately 110 basis points. Inclusive of the HUD MIP, the total spread is about 170 bps over the 10 Year Treasury, fixed for 35 years, making it more attractive than other pricing options in the market. As of this writing, the 10 Year Treasury is hovering around 2.50%, well below where we started the year, around 3%. Also, HUD pricing for 35 years fixed is approximately 25 basis points better than FNMA/Freddie Mac financing that is fixed for 10 years.

On a non-HUD note, we recently received a Life quote at 3.5% fixed for 5 years interest only, however the leverage was quite low, utilizing a 65% LTV ratio at an 8.5% lender cap rate. This really reflects an LTV ratio of about 55% based on a market cap rate for the property type, which is approximately 7% to 7.5%. Insurance pricing spreads are typically priced off the corresponding Treasuries, as opposed to swap rates, and is consistently in a spread range of 170 bp to 190 bp depending on the deal. Life company leverage is lower than other choices available to borrowers in the market, thus spreads are quite attractive.

We would like to feature lender terms on conduit deals with loan amounts down to $1 million. These terms carry spreads that are quite attractive, particular for smaller loans. Additionally, the total financing costs do not require additional fee premiums, thus the loan fee is 1%. These deals are non-recourse and fixed for 10 years. Here are the general terms:

Loan size: $1MM +

LTV: 70% hotels 75% all other property types

DSCR: 1:35x for hotels 1:30x all other property types

DEBT YIELD: 10+ for hotels 9+ for all other property types

Rates range from approximately 180 bp over the 10-year swap rate to approximately 250 basis points, depending on property class and property type. This puts present pricing fixed for 10 years from just under 4.50% fixed to approximately 5%. A swap rate from a bank fixed for 10 years would require a floating rate below LIBOR + 200 basis points to match this pricing. Presently the 30-Day LIBOR rate is .16 for loan floating over this rate.

Also note forward rate locks are available with most life insurance company lenders up to 9 months, possibly 12 depending on the deal. The rate premium beyond 60 days is approximately 5 basis points per month.

Let’s take a look at the best rates and terms we are seeing in the marketplace:

* 3.50 % fixed for 5 Years. Low leverage (Source is Life Company with LTV ratio at 65%)

* 3.60% fixed rate loan for 35 Years prior to .60% MIP (Source is Red Mortgage Capital) GNMA spreads have risen approximately 20 basis points over past 30 days.

* 4.35% fixed rate loan for 10 Years (Source is life insurance company and agency with LTV up to 75% to 80%)

* Derivative pricing enables a 1% LIBOR cap of 1% for 3 years at a cost of 1.50% of the loan amount, or approximately 50 basis points per year.

Trillium Capital Resources facilitates financing for all property types, with loan execution from our correspondent lenders. We are recognized as an alliance partner with Red Mortgage Capital. We will not be OUTBID or OUT SERVICED on any financing deal and will always be competitive with ANY lender!!!