While Fannie Mae and Freddie Mac continue to win the lion’s share of multifamily business, other capital sources are growing more competitive. Life insurance companies and banks are stepping up to the plate again for certain assets and executions, and even conduit lenders are pricing more competitively now.

The rates that conduit lenders are offering today are as low as they’ve been in years. Conduits are now quoting 5.5 percent rates on 10-year deals, and closer to 5 percent on lower leverage transactions. That’s about 150 basis points lower (bps) than what was being offered just four months ago, in early June.

While a vast improvement, that 5.5 percent rate is still 100 bps more than what the government-sponsored enterprises (GSEs) are offering. “Realistically, no conduit is going to be anywhere close to being competitive with Fannie or Freddie at this point,” says John Cannon, executive vice president at Horsham, Pa.-based Berkadia Commercial Mortgage, which has some correspondent relationships with some major conduits. Many conduit lenders are happy to quote multifamily deals, he adds, “but if they won it, they would be scratching their heads.”

The other problem is, many conduit lenders shy away from smaller deals. To build up a critical mass of loans for securitization, the biggest conduits, such as Morgan Stanley, JPMorgan, Deutsche Bank, and Citi are privileging large loans of $20 million or more. Smaller conduits, such as Cantor Fitzgerald and Bridger, will go down to $10 million, though.

While these lenders aren’t winning much, if any, multifamily business today, the growing pace of activity points to a recovery. And many lenders, including Berkadia and CWCapital, are now hoping to create their own conduit platforms again in anticipation of the market’s full-bore return.

It’s a similar story on the life insurance side. The biggest life insurance companies such as Prudential, MetLife, and New York Life, are growing more active each passing month, but are focused on large loan sizes, above $15 million. Smaller life companies, such as Aviva and Sun Life, are actively quoting deals below that threshold. “Life companies are incrementally more aggressive each successive day, week, month,” says Cannon at Berkadia, which serves as a correspondent to several life companies. “It’s encouraging, though you wish it was more.”

The rates offered by most life insurance companies are still higher than the rock-bottom rates from the GSEs, where borrowers can get 10-year deals (with a couple years of interest-only) in the mid-4 percent range. What’s more, the loan-to-value levels being offered by most life companies are mostly in the 60 percent to 65 percent range, though of late some have reached up to 75 percent. And for Class A assets in the best markets, life companies can go toe-to-toe with the GSEs on pricing and underwriting.

Yet many life companies are a bit less competitive now than they were just two months ago. As the 10-year Treasury fell 50 bps in August, and stayed in the mid-2 percent range in September, the GSEs rates dropped accordingly. But life insurance companies continued to underwrite with higher interest-rate floors, which hampered their competitiveness.

“As the 10-year Treasury dropped significantly, we started to see that some of the life companies couldn’t compete as well because they had absolute floors that they need to achieve,” says Michael Berman, president and CEO of Needham, Mass.-based CWCapital. “That competition is still there but it’s waned a little bit in the last several weeks.”

Still, there’s enough momentum in that space that CWCapital is thinking of starting a life insurance company platform either through its joint venture with Apartment Realty Advisors, or as an internal division. The company hopes to forge correspondent relationships with about six insurance firms focused on the multifamily space.

And for short-term floating-rate loans, banks are starting to heat up again, lenders and brokers report. Some of the most competitive offerings these days are coming from Canadian banks with footprints in America, such as CIBC and Toronto Dominium, which have been particularly competitive of late.