If you listen hard, you can hear the pulse of the CMBS market beating again.

Conduit lenders are creeping back, increasing their visibility and production as the year goes on. Firms such as Goldman Sachs, JPMorgan Chase, Bank of America, Deutsche Bank, RBS, Cantor Fitzgerald, and Bridger Commercial Funding are actively quoting and closing loans.

It’s a much more humble enterprise these days, however, and the industry’s heyday of 2007 seems like decades ago. Today’s conduits are targeting stabilized assets in large metro areas, as well as large deal sizes, often more than $15 million or $20 million. The rates being offered are in the mid- to high 6-percent range, about 100 basis points (bps) higher than what you can get from the government-sponsored enterprises (GSEs).

But many in the CMBS industry feel it’s just a matter of time before their execution becomes more viable for multifamily borrowers. In April, a $309 million issuance from RBS was oversubscribed, and another multi-borrower issuance of more than $800 million is coming soon from JPMorgan. This slow but steady momentum has allowed pricing on conduit loans to come in about 100 bps in the last three months.

“Six months ago, there were no multi-borrower issues that had gone to market,” says Paul O’Rear, executive vice president and chief credit officer at San Francisco-based Bridger Commercial Funding. “We’ve now had one or two, and they’ve been well-received, and that gives us confidence that the demand for CMBS bonds is there.”

Bridger does not market directly to borrowers, but instead works primarily with financial institutions that lack their own securitization capability. The company is currently offering five- and 10-year loans that can go up to 75 percent loan-to-value and down to a 1.25x debt service coverage ratio (DSCR). Full leverage transactions are being priced in the high-6 percent range, but the price becomes more competitive on lower leverage transactions.

At the peak of the market in 2007, Bridger employed about 95 people. Now the company is rebuilding with just 15 employees. Bridger is looking to ramp up its production staff—relationship managers, credit managers and deal closers—this year, with a target of originating about $300 million, a far cry from the its $1.5 billion run rate at the height of the market.

It’s a little too early to pronounce the industry’s return to health, though. The economic woes roiling the Euro, and the uncertainty in pricing bonds, are slowing down the industry’s re-emergence.

“The market turmoil derails it in the short-term and leads to uncertainty as to how to price,” says Clay Sublett, national production manager and CMBS director for Cleveland-based KeyBank Real Estate Capital. “When you’re uncertain on where to price, you price wide, you build in that uncertainty. But if things calm down, you’ll see loans priced more in the low 6 percent range.”

And the CMBS industry continues to deal with the fallout from the last boom time. The CMBS delinquency rate for commercial real estate loans (30 days or more delinquent) rose to 8.4 percent in May, with the multifamily delinquency rate jumping to 13.3 percent.

One of the reasons that multifamily CMBS loans have such a high delinquency rate is that conduit lenders often stretched underwriting and lowered rates to get a certain percentage of multifamily loans into their pools. By doing so, they could sell the bonds to Fannie Mae and Freddie Mac.

But multifamily borrowers shouldn’t expect the same treatment going forward. “They would do multifamily back in the day at a break even or maybe even a loss to create their pool dynamics,” says Mike Kavanau, senior managing director at Holliday Fenoglio Fowler's Chicago office. “It allowed them to sell the paper to Fannie and Freddie, but my gut is that that game has run its course. They’re not going to do loss leaders on multifamily.”