Fannie Mae and Freddie Mac have dropped their spreads to help keep all-in interest rates low.

When the yield on the 10-year Treasury began rising in the winter, all-in rates shot up by about 100 basis points, into the mid-to-high 5 percent range, for deals with maximum leverage. But in the last six weeks, the government-sponsored enterprises (GSEs) have lowered their spreads by about 20 to 30 basis points (bps), resulting in rates of around 5.4 percent for 10-year loans.

“We’re seeing an improvement in rates—spreads have come down off of their highs,” says Phil Melton, a senior vice president at Charlotte, N.C.-based Grandbridge Real Estate Capital. “Fannie Mae did a general reduction in some of their rates, especially in larger sized transactions.”

Both GSEs seem to be on par right now in terms of rates, and either is willing to get a little more aggressive if they really want a deal. For Fannie Mae, keeping rates below 5.5 percent is particularly important—the company uses an underwriting floor of 5.5 percent in sizing loans, and when interest rates are above that milestone, loan proceeds are affected.

“We’re getting awfully close to floor rate problems on 10-year deals, which may become more prevalent if Treasuries pop up again,” Melton says.

Of course, the Federal Housing Administration (FHA) continues to offer rates well inside of Fannie—some 10-year Sec. 223(f) deals are quoting around 4 percent. Yet borrowers will need patience—the FHA takes at least twice as long to process a loan as the GSEs.

Life insurance companies are also growing more active, especially for deals in the 65 percent to 70 percent LTV space for B-plus assets and above. And life insurance companies, always conservative, are coming inside of the agencies on lower leverage transactions.

But CMBS lenders haven’t been winning too many multifamily deals yet. Spreads on CMBS loans are having a hard time competing with the GSEs’ own securitized programs.

“Freddie’s CME right now, from a cost of funds perspective, is much more attractive than what the conduits have been pricing,” Melton says. “And when you’ve got Fannie, Freddie, the FHA and life insurance companies all looking at multifamily, it’s awfully difficult for the conduits to compete. That doesn’t mean they wont, it just means that they’re not there yet.”