5 Must-Reads for the CRE Industry [November 2020]

Posted by Alex Dimitroff on Nov 30, 2020 3:15:04 PM
Alex Dimitroff

1. Commercial/Multifamily Borrowing Falls in Q3

“The COVID-19 pandemic continues to impact new originations of commercial and multifamily mortgages. Compared to last year’s third quarter, commercial and multifamily originations were 47 percent lower, according to the Mortgage Bankers Association’s (MBA) Quarterly Survey of Commercial/Multifamily Mortgage Bankers Originations.” (Commercial Property Executive, 11/20)

Borrowing volume via MBA
What you need to know:

  • Every major property type recorded a year-over-year decline, however, originations did increase 12% compared to the second quarter of 2020. According to MBA’s CREF Loan Performance Survey, commercial and multifamily mortgage performance improved in October.
  • The third quarter saw a 94% year-over-year decrease in the dollar volume of loans for hotel properties, an 83% decrease for retail properties, a 58% decrease for office properties, a 31% decrease in multifamily properties, and a 23% decrease for industrial property loan originations.

Read the full article here.

2.  FHFA Announces 2021 Multifamily Loan Purchase Caps for Fannie Mae and Freddie Mac

“The Federal Housing Finance Agency (FHFA) today announced that the 2021 multifamily loan purchase caps for Fannie Mae and Freddie Mac (the Enterprises) will be $70 billion for each Enterprise. The cap structure allows the Enterprises to offer a combined total of $140 billion in support to the multifamily market.” (Federal Housing Finance Agency, 11/17)
  • At least 50%, or $70 billion, of 2021 loans must be dedicated to affordable housing. This is an increase from the 2020 requirement of 37.5%. To qualify as affordable housing, the property must be affordable for residents at 80% of area median income or below. 
  • The new lending standard also require that at least 20% of Fannie and Freddie multifamily lending target affordable housing for residents at 60% area median income or less.

Read the full article here.

3.  CMBS Issuance Volume Improving: KBRA

“In its new 2021 Sector Outlook, CMBS: Slow and Steady, Kroll estimates this year’s total CMBS issuance will be 55 percent while $95 billion was anticipated.” (Commercial Property Executive, 11/24)

  • Kroll anticipates that CMBS volume for 2020 will total $53 billion to $55 billion, the lowest total since 2012. However, with a recent jump in activity on track expected to continue, CMBS volume in 2021 will reach an anticipated $60 billion.
  • The agency’s projected 2021 issuance volume of $60 billion consists of equal parts conduit issuance and single-asset single-borrower/large loan issuance. Conduit loan activity for 2020, expected to be $28-$29 billion, will exceed the projected $25-$26 billion of SASB and LL issuance. In 2021, conduit and SASB/LL will each total $30 billion. 

Read the full article here.

4.  Lodging and Retail Reach Highest Delinquency Rates in CMBS History

“During the great financial crisis, CMBS distress took a while to play out. CMBS delinquencies and special servicing rates didn’t reach their peak of 10.3% and 13.4% until mid-2012, according to Trepp. During the current COVID-19 crisis, things have moved a lot faster. Lodging and retail suffered immediately after travel and non-essential shopping stopped in the spring.” (GlobeSt, 11/3)

  • Trepp estimates that about 5.5% of non-agency CMBS loans—more than $31.2 billion across 800 loans—have been granted forbearances. Approximately 64% of that forbearance total is backed by lodging while retail loans comprise another 28%.
  • In October, Trepp estimated that $3.9 billion in almost 100 outstanding CMBS loan balances, consist of borrower’s that have indicated a willingness to turn over the asset to the lender. Limited and full-service hotels represent approx. 36% of the total while regional malls account for 26%.

Read the full article here.

5.  IRS Releases New Regs on Income for LIHTC Housing

“The US Internal Revenue Service has released new regulations regarding the income averaging option for Low Income Housing Tax Credit housing. Income average is used by LIHTC properties use to serve residents making up to 80% of the median area income. The new regulations address several key issues and provide clarity for the model.” (GlobeSt, 11/4)

  • Previous program rules required owners to rent either 40% of their units to households earning 60% of area median income or less, or 20% of units to those earning no more than 50% of AMI. Now, income-averaging rules allow owners to reserve 40% of units for residents that collectively earn below 60% of the average area income.
  • The new regulations also clarify how the next available unit rule applies under the income-averaging model. The property owner may rent the next available unit to a qualified tenant with the same or lower income than the unit where a resident exceeds the requirement. 

Read the full article here.

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Topics: Market Update, Investment

Alex Dimitroff
Written by Alex Dimitroff

As Financial Analyst, Alex supports RRA Capital's senior managers in property underwriting, loan closing, and fund administration. Alex is a CFA Level I candidate and a recent Finance graduate from Barrett, The Honors College at Arizona State University.