For a while, it seemed like Fannie Mae and Freddie Mac kept the multifamily transaction market going by themselves. And while they still retain a very pivotal role in the multifamily debt game, there are more players coming onto to the field, according to panelists at the MFE Conference last week in Las Vegas.

Right now, those new players are just beginning to appear. Clay Sublett, national production manager for KeyBank Real Estate Capital, has seen lending coming from a lot of different sources. “Some organizations, including Key, have started to mobilize,” he said.

Some lenders on a smaller level are looking as well, though it’s hard to make generalizations with some banks in bad shape and others in good shape. “Community banks are the land of the haves and have-nots,” Sublett said. “Big banks, like Bank of America and Wells Fargo, are also returning and looking for deals. They’ve changed their mindset from looking to stop losses to looking for revenue.”

Life insurers have come back in as well, but generally prefer better borrowers, trophy assets, and longer loan terms. In those cases, they can provide better pricing though. “The life insurance space has been an evolving animal,” said David Durning, senior managing director of Prudential Mortgage Capital Co.

Dealing with Distressed Borrowers
In many ways, the people who need multiple sources of financing the least are the most likely to get it. “Those people who have weathered the storm are probably the beneficiaries of this market,” Sublett said.

Moderator William Hughes, managing director for Marcus & Millichap Capital Corp., pointed out that some banks will work with borrowers. “You will find them willing to work with borrowers who have cash flows in their real estate,” he said.

But other lenders and servicers either want to cut bait or won’t listen to their borrowers. For instance, O’Rear said he’s seen a lot of lenders approach their borrowers to take discounted payoffs.

And other borrowers even have good reasons for defaults. Sometimes, taking a default is the only way to get a servicer to speak with you. “We’re seeing borrowers forced to put properties in default,” said Mitchell Gould, executive vice president for BRT Realty Trust.

Eventually, those troubled borrowers will be looking for new sources of financing. And each lender needs to figure out how they’ll handle them. “There are a lot of borrowers with credit issues, and the CMBS market is trying to figure out how to look at someone with a discounted payoff or foreclosure,” O’Rear said.

O’Rear added that, in many cases, lenders are looking past the foreclosure to how the borrower actually conducted business. “Such a high percentage of the market ended up in workout that it really comes down to the borrower’s character and integrity and how the workout went,” he said.