KeyBank Aims to Triple Multifamily Financing in ’08, Benefiting from the Reconfigured Marketplace

By Keat Foong, Executive EditorDallas, Texas—KeyBank Real Estate Capital is on track to reap a windfall in the multifamily sector while the capital markets turmoil is playing itself out. Colin Whittier, vice president and senior marketing analyst, indicates that the company is tripling the goal for its Fannie Mae, Freddie Mac and FHA multifamily financing business to just over $1.4 billion in 2008. KeyBank’s experience may be typical at other agency lenders who are benefiting from the conduit pullback from the market. Indeed, both Fannie Mae and Freddie Mac announced record financing volumes for multifamily in 2007. (During the year, Fannie Mae financed $60 billion in multifamily rental housing, and Freddie Mac purchased $44.7 billion.)“We think it will be a record year for us in 2008 especially on the agency side,” says Whittier, in an interview with MHN. According to Whittier, the volume of multifamily financing that KeyBank Real Estate Capital has identified so far already exceeds that 2007. “By the end of the second quarter, we should have more business than in the whole of last year.” The credit crisis exploded in the summer of last year. Until then, conduits had begun to become intensely competitive with the agency lenders. With the advent of the credit crisis, however, the conduits the most part were sidelined as buyers of commercial real estate-backed securities pulled back from the mortgage-backed bonds market. Spreads in Fannie Mae and Freddie Mac financing today may average about 200 basis points over comparable 10-year Treasuries, says Whittier. By comparison, conduits that are still quoting spreads of 350 to 370 basis points over comparable Treasuries. Insurance companies’ spreads fall in between the two, at about 300 basis-point spreads, he indicates. Although spreads have increase sharply even for Fannie Mae and Freddie Mac financing, Whittier says that it is still possible to obtain up to 80 percent LTV and DSCs of 115 to 120 with the agency financing.