SPECIAL REPORT: Mortgage Bankers Conference’s Opening Session Places Positive Spin on Credit Turmoil

By Keat Foong, Executive Editor  Orlando, Fla.–While uncertainty swirls over the credit crisis in the financial markets, the Mortgage Bankers Association’s (MBA) Commercial Real Estate Finance/Multifamily Housing Convention & Expo opened on a note of good spirits, evident in the general session address by Kieran Quinn, MBA chairman.  Quinn said the “golden age” of real estate finance, characterized by abundant capital and the lowest interest and cap rates in the memory of many players, came to an abrupt end on August 15th, 2007. “Golden ages are also defined by their endings,” he noted. And this financial golden age, he said, was no exception.  However, Quinn, who is also chairman of Column Financial Inc., suggested that commercial real estate finance may have merely returned so far to the financing conditions of a few years ago and that real estate fundamentals remain strong. “On the whole, the correction for us means going back to the 1990s and early 2000s,” he said. “We know that was not so bad.”  Quinn reported that capital remains inexpensive, but the underwriting is more careful. “We’re not seeing 90 percent loans, but loans that hover around 70 percent.” Underwriting, he said, “already looks a lot like it did in the 1990s.”  Meanwhile, Fannie Mae, in a press conference, underscored the strong fundamentals of the multifamily market that are underpinning the finance market. Phil Weber, senior vice president of Fannie Mae’s multifamily division, said some of the numbers for multifamily over the next few years are “phenomenal.” The population of the U.S., he said, is set to grow by 14 million over the next five years, or by 1 percent per year. And job growth is projected to be 8.2 million over the next five years. Apartment vacancies, rent growth and absorption have declined, but all remain positive. “We’re very optimistic. We think the next 20 years of DUS will be even greater than the past 20 years,” predicted Weber.  Quinn seemed to agree with this outlook, characterizing his own mood as “rational exuberance.” He said the mortgage finance industry should now be concerned about how to restore investor confidence in real estate and how to “bring back that liquidity” into the capital markets.