As the Federal Housing Administration works to bring more clarity and transparency to its lender certification requirements—in an effort to increase the participation of banks in the agency’s mortgage program—non-bank lenders in the sector claim it’s a perfect time to be a borrower. At the same time, the U.S. Department of Housing and Urban Development is striving to tighten its lending timeframes for the benefit of the borrower.
Nikhil Kanodia, head of production for FHA lending at Greystone, adds HUD’s expansion of the low-income housing tax credit pilot program as another reason why multifamily property owners should take advantage of the low-rate environment. Kanodia joined Greystone in 2014 as managing director.
What are the main trends in today’s multifamily financing landscape?
Kanodia: We are still seeing record volume for loan origination across the board in FHA, agency—Fannie Mae and Freddie Mac—and bridge and mezzanine financing for multifamily acquisitions and refinancings. Interest rates have relaxed over the past few months, making the FHA product especially attractive. This platform offers a low, fixed rate for 35-plus years at 80 percent leverage or higher, and at Greystone it is non-recourse. The agencies are also still very competitive, so it’s a great environment in which to borrow right now. Non-bank lenders like us are certainly seeing more of the share of lending activity than ever before.
What are the challenges in the FHA lending sector and how can these be overcome?
Kanodia: While timing can be a concern as it can take up to four months or more to close an FHA loan, there are solutions to help a property investor take advantage of this long-term, low-rate financing while still seizing the moment on an acquisition or refinance. Bridge financing has become a very popular option for short-term capital. At Greystone, we have no lockout or prepayment penalty while we work on the long-term exit. At the same time, HUD is more committed than ever on tightening their timeframes and making the loan application process more efficient.
With such a high demand for affordable apartments in all major cities, how would you describe the affordable housing financing segment?
Kanodia: This is certainly an area of growth for our business. We are seeing new and innovative lending products to help satisfy the demand for affordable and workforce housing, including HUD’s LIHTC pilot program, which provides a speedier closing for new construction and substantial rehabs of affordable housing.
What do borrowers need to know when it comes to multifamily financing today?
Kanodia: Many multifamily property owners are still unaware of the HUD product or have misconceptions about the qualifications or timelines for securing this type of financing. It’s certainly an option to explore with today’s rate environment, whether for a refinance or your next acquisition.
How do you expect the late-cycle economy to impact the underwriting process for multifamily loans?
Kanodia: Late-cycle or early-cycle, we think there is still a lot of runway for the multifamily asset class. The demand for rentals, especially in the middle market, remains strong and the fundamentals are such that it will remain one of the most favorable asset classes for real estate investment for the long term. Despite where we may be in the current cycle, we haven’t changed or loosened any underwriting standards.