Commercial entities challenging GSE lead in originations

Some life insurance companies and commercial banks have been able to maintain a major role in the commercial real estate lending market despite the growing involvement of Fannie Mae and Freddie Mac, said panelists at the Apartment Finance Today Conference.

The government-sponsored enterprises have achieved this, in some cases, by operating with greater flexibility. In addition to offering competitive interest rates, they may be able to fully fund loans at closing when a GSE would require a substantial escrow, for example. Experts say commercial bank involvement has been somewhat sporadic, according to AFT, with individual entities acting on product preferences that are not necessarily reflected by their competitors.

Life insurance companies, on the other hand, are competing in specific areas. Their originations may provide for permanent debt meant to last 15 to 20 years, or prepayment flexibility. These specific strengths are allowing them to originate significant volume in loans that the GSEs might not cover, or may hesitate to finance.

These differences may lead to greater overall availability of financing for the industry, likely resulting in more construction in the long run. That may mean increased opportunities or competition for multifamily owners and rental property management professionals.