EDITOR’S NOTE: Relative Calm in the Midst of Turmoil

By Keat Foong, Executive EditorIt was certainly hair-raising to watch the stock market in the past week. By Friday, the Dow Jones industrial average had fallen from 9,955.50 on Monday to 8,451.19 points—a drop that was reportedly even worse percentage-wise than the 17 percent plunge in the week ending July 22, 1933. Part of the current panic has to do with the suspended financing markets—which one would think at its worse can lead to economic collapse. In this regard, the Treasury’s announcement this week of the plan to inject $250 billion into banks, guarantee inter-bank lending and backstop the commercial paper market, hopefully will help unfreeze the credit markets. Already, there are reports of the credit markets easing. We’ll see. Through this swirl of serious distress in capital markets, it is good to be able to say that multifamily financing—that is, on the permanent debt side—has not been adversely affected to the same, severe, extent, for now. The multifamily market is backstopped by the now government-owned Fannie Mae and Freddie Mac financing. And sources provide the assurance that the government wants “full speed ahead” with multifamily lending through these two agencies. Permanent, acquisition and rehab financing that can be obtained from Fannie Mae and Freddie Mac programs are still relatively available—though much more competitive now, and projected income is no longer acceptable in underwriting. And the all-in interest costs remain surprisingly attractive and historically low—being still in the low- to mid-6 percent range. Construction financing, however, is another story. The banks have pulled back and it is now very difficult to obtain such interim financing from banks. However, take notice that  FHA-insured financing is doing good business in this environment. And if developers don’t mind the arguably longer time frames and greater amounts of paperwork of HUD processing, they may want to explore FHA-insured financing for new construction or substantial rehab.