There is lot of speculation about what’s in store for the commercial real estate lending climate over the next year.
Well, one thing is pretty certain. Freddie Mac’s small-balance multifamily loan platform, which was enacted in October 2014, is sure to keep picking up steam.
This platform is specifically for apartment complexes that range between $1 million and $5 million. They never had that for the smaller multifamily properties in the past, and now they have a new program that is a streamlined, faster process.
Some of the benefits include: simplified pricing and early rate locks, with the help of full underwriting. It’s less documentation for clients, and it also applies to third-party reports, which is what GRS Group supplies.
The insurance-access process is also simplified. Additionally, the documents that firms have to fill out for the loans are shorter and reduced in size, which helps with the legal due-diligence requirements as well. It makes it easier on the borrower for these small properties to go through Freddie now. Loan rates were great last year to kick this off, so it really made for an attractive package to use. There are also several different loan options. The ones we typically see are 10-year fixed, but they have different rates for small balances as well. They can range from three to five, to 10 years, and higher.
There are some caveats with these smaller apartments. They have to have at least five units as a qualification. We typically see a lot of these in the bigger markets like New York City, Los Angeles, Chicago and throughout Texas.
So far there haven’t been a lot of refi’s. The first year and a half of the platform’s life has so far been geared toward acquisitions. But there are some that used to be in Fannie Mae’s program, which are refinanced into the Freddie small balance. But we have mostly seen this done for acquisitions.
As far as GRS goes, we were one of the consultant groups that Freddie went to when it was starting this program. We were an advisor to help them to whittle down their template. They created the platform, and gave it to us, and other firms, to proofread it and hear our thoughts. We have an open dialog with Freddie to help fine tune the property condition/environmental form that it has, called an 1104 Form (downloadable here), which is the report that we execute.
We have done about 275 of these in a year and a half, which averages almost one a business day. GRS | Corteq is a leader in the property condition reports and environmental site assessments, as far as the sheer volume of these that we have completed to date.
This helps us give our clients a heads up on potential problems they might face to secure the loan, especially in New York City, and on the West Coast, with seismic reports.
Overall, since it’s a leaner report, the costs are less, and it’s a faster and simpler process for all parties involved.