Orlando-The mood at this year's Mortgage Bankers Association (MBA) CREF/Multifamily Housing Convention was one of concern, as the lack of investor confidence in the capital markets continues to slow the pace of business.

Conduit lenders expressed cautious optimism that the market for commercial mortgage-backed securities (CMBS) would return by the end of the year, while lenders affiliated with government-sponsored enterprises (GSEs) Fannie Mae and Freddie Mac were the belles of the ball.

The lending industry's return to historical underwriting standards has favored GSE lenders. Fourth quarter CMBS originations were down 31 percent, while the GSEs saw an increase of 41 percent compared to the fourth quarter of 2006, according to the MBA. Fueled by that second-half surge, Fannie Mae and Freddie Mac both announced record 2007 volumes at the conference, at $60 billion and $44.7 billion respectively.

Freddie Mac's multifamily chief, Mike May, surprised the conference by informally announcing at a panel session that the company is prepping a conduit execution of its own as a hedge against the next time the CMBS market dominates multifamily.

Fallout from the single-family subprime industry's meltdown will continue to affect multifamily deals through the year. "Shadow markets," those with an overabundance of unsold condos and single-family homes such as Las Vegas and Miami, were often cited as sources of concern for lenders.

The good news is that multifamily has proven to be one of the more stable property types and should weather the credit crunch well. Rent growth and vacancy rates are expected to remain stable in major markets through the year. Other key demographics, such as the emergence of 1.8 million "echo boomers" (20- to 34-year-olds) entering the rental market over the next five years, bode well for the sector.

As such, liquidity for multifamily deals is readily available, albeit at higher rates than developers were getting a year ago. For a typical 10-year, fixed-rate multifamily loan, the GSEs were quoting 180 basis points over the 10-year Treasury, while conduits were quoting 300 basis points or higher, lenders reported.

Jerry Ascierto is a senior editor with APARTMENT FINANCE TODAY, a sister publication to MULTIFAMILY EXECUTIVE MAGAZINE.