It's a good time to be one of the most prolific agency lenders in the nation.

Capmark Finance originated about $3.9 billion in Freddie Mac loans in 2008, making it the No. 1 Freddie Mac lender in the country last year. While Capmark defends its Freddie crown in 2009, it also looks to maintain top-cat status in Federal Housing Administration (FHA) loans. Capmark processed about $450 million in FHA financing in 2008, making it the No. 1 lender for the FHA's fiscal 2008.

The company's Fannie Mae license also got a lot of action in 2008, as Capmark processed around $1.4 billion in Fannie Mae loans, up from $1.1 billion in 2007. Though it wasn't the nation's top Fannie Mae lender in 2008, two out of three certainly ain't bad, especially given today's market environment.

Fannie Mae, Freddie Mac, and the FHA are serving as beacons for the multifamily market through the deepening liquidity crisis, with some estimates showing the three combined to provide 80 percent of all multifamily loans in 2008.

One promising new lending program that Capmark began offering was Freddie Mac's Capital Markets Execution (CME). Capmark was one of five lenders chosen by Freddie Mac to originate loans in a pilot program for most of 2008, before the program went live with all Freddie Mac Program Plus lenders at the end of the year.

Freddie Mac originated about $415 million in CME loans in the “pilot” phase of the program throughout 2008, with $400 million more in the pipeline as the year ended. Capmark was singlehandedly responsible for about half of that overall $815 million figure.

“That will be a bigger product on a go-forward basis, Freddie Mac is really pushing it,” says John Cannon, Capmark's head of agency lending. “From a borrower's perspective, you could get a 25-basis point discount in rate, and a bit more proceeds, doing a CME deal versus a portfolio deal.”

Beyond the better pricing, the CME program also offers supplemental financing, a long-time fixture of agency portfolio executions, but very rarely seen in conduit loans.

The CME program works like a conventional conduit execution. Freddie Mac bundles the loans from its Program Plus lender network, works with the issuer to structure the commercial mortgage-backed securities offering, and then either purchases or guarantees the senior bond, while the subordinate bonds are sold to investors.

FHA pipe swells

With a lack of viable construction capital on the market, developer interest in the FHA is reaching a fevered pitch. Capmark reports a $2.5 billion pipeline of FHA loans, much of it for the FHA's flagship Sec. 221(d)(4) program, a non-recourse construction-to- permanent loan that features 90 percent loan-to-cost, a 1.11x debt-service coverage ratio, and 40-year amortization.

“Our FHA pipeline is substantially higher than it has been in the past,” says Cannon. “They are one of the very few viable construction lending sources right now.”

The problem is, FHA loans are priced off of Ginnie Mae securities, which were pricing at historic levels—around 300 basis points over the 10-year Treasury—in late January. As a result, a typical Sec. 221(d)(4) deal was being priced with all-in rates (including the mortgage insurance premium) of 7.3 percent in late January. A year ago, the loans were going in the low- to mid-6 percent range.

“Nothing is closing because the spreads are so high,” says Cannon. “It's like water building up behind a dam.”

While Capmark doesn't expect to reach $8 billion again in 2009, like it did in 2007, the company is optimistic that the multifamily industry's longterm prospects are bright.

“We've entered 2009 with more stress than in 2008, but the long-term demographics are really strong with immigration and echo boomers driving demand,” says Cannon. “The forecasts are very positive stretching out to 2015.”