Garnet Capital Advisors Blog

EXCERPT:

Multifamily loan originations have continued to be attractive fee and balance sheet additions for banks across the country. However, considering the fact that most community banks have limited balance sheet room, lenders may need to sell multifamily loans in a profitable and compliant manner, which is where the assistance of an experienced loan sale advisor can prove critical.


The demand for multifamily housing continues to increase, making this sector an attractive one for lenders.

The total amount of multifamily mortgage debt outstanding is continuing to grow at a robust pace among US banks.

Moderate economic growth, continued low interest rates, and specific demographic drivers have continued to boost the multifamily lending market throughout 2016 following the heightened demand for such lending in 2015. For the most part, vacancy rates in apartment buildings have been quite low throughout the year while rents have continued to increase in the majority of markets across the country.

The trend is expected to continue in 2017 as many new multifamily units will continue to be built and developers plan to build even more. Low unemployment rates coupled with reduced affordability for home ownership are also driving strong demand for multifamily rental units.

Multifamily apartment building supply is on a pace that hasn't been seen for three decades, and is expected to continue into next year with the vacancy rate across the US staying under the historical average. As such, the growth in rent will stay relatively strong with demand driving continued supply.


Since many lenders may have an excess of small multifamily loan assets in the books, they may need to sell at some point.

This particular sector has been on a strong upward trend, and the end of 2016 could mark a record volume of multifamily lending as loan originations in this sector are nearing the $200 billion mark.

Among this $200 billion will predominantly be smaller low-balance loans, with a handful of larger high-balance loans. The third quarter of 2016 realized a 26 percent increase year-over-year in the dollar volume of loans made for multifamily properties.

While approximately half of these multifamily loans were for amounts under $700,000, the average loan was for roughly $3 million. And yet, there were loans originated for as much as $100 million in 2016, showing great variation in this particular loan sector. With the high level of multifamily building construction over the past few years, an increase in both large and small-balance lending has resulted.

Most of the multifamily loans made this year have been for less than $1 million, yet about 36 percent of the volume was for loans in excess of $30 million. A comparable trend can be noticed when looking at the size of the properties. Approximately 30 percent of the apartment buildings financed during the first two quarters of 2016 were for those with 50 or less apartment units, yet 58 percent of the principal for multifamily loans originated were for buildings with over 100 units.

Loan Sale Advisors - Helping Lenders Optimize Their Loan Portfolios

Since the majority of multifamily lenders are small, that means some lenders will have loan portfolios with excess originations that they might need to sell. At the same time, other lenders may want to boost their exposure to this increasingly attractive sector.

Either way, such moves require the guidance and assistance of experienced loan sale advisors, such as Garnet Capital. Both buyers and sellers of loan assets would be well advised to increase their exposure in the market and sell certain loans in a compliant and comprehensive manner such as is done with all Garnet Capital sales.

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