The year is opening up very well for the commercial real estate financing market.

Treasury rates have dropped significantly since December. Rest assured this level of interest rates WAS NOT expected by anyone. We have attended several conferences that projected a 10-year Treasury at 3% or higher by this time. Also, the Fed has repeatedly positioned itself to project higher short-term rates via the Fed Funds Rate by the middle of 2015.

What lies ahead for interest rates:

Probably a flattened yield curve in which short-term borrowing rates will begin to ascend to levels of longer-term borrowing rates. This will likely be the result of anemic growth in the world economy and low inflation expectations. Low inflation expectations are difficult to believe after the massive amount of money that was printed, but as of now, low inflation is still anticipated in the near term.

Treasury yields are even below many stock dividend yields for blue chip stocks, which appears bullish for stocks as well. This is all great news for borrowers at all levels! We will be attending the annual MBA CREF Conference in San Diego in a couple of weeks and will update you the latest and greatest on interest rate projections.

You will note that overall spreads have been slightly widening as the Treasuries have dropped significantly over the last 60 days. This is true for the CMBS market, FNMA, Freddie Mac and FHA. For HUD financing, a recent lock (as of yesterday, January 20th, locked in a rate in the 3.20% range, when the 10 Year Treasury was 1.80, so spreads are in the 135 to 140 range over the 10 Year prior to MIP. The last time the Treasuries were at this level, we locked in an FHA rate at 3.05% when the 10 Year was at 1.95, resulting in a spread of 110 basis points (May 2013) at that time.

Below is an illustration of GNMA (HUD) spreads for competitive market pricing achieved over the last 12 months. These spreads are over the 10-yr Treasury as opposed to 10 Year swaps.

GNMA Spreads representing the Mortgage Rate Fixed for 35 Years over the 10 Year Treasury:

The recent increase in spreads is simply due to the dramatic decrease in Treasuries. If Treasuries consistently maintain these levels, the spreads will come down the first quarter.

Here are the best terms in the commercial real estate financing market today:

3.75 % fixed for 10 Years. Low leverage (Source is Life Company, Fannie Mae and Freddie Mac with LTV ratio at 65%) Higher LTV increases rate to approximately 4%.

3.15% fixed rate loan for 35 Years prior to .60% MIP (Source is Red Mortgage Capital, GNMA/HUD)

Conduit Pricing is 175 BP to 200 BP over 10 Year Treasury Swap, pricing 10-year money at 3.90 to 4.00% fixed rate loan, which is right in line with FNMA/Freddie Mac pricing.

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!