Orlando, Fla.–When America’s commercial mortgage bankers gather here Feb. 3- 6, they will grapple with the latest issues facing the industry: much slower growth in mortgage originations and increased capital markets volatility.
Many of the sessions at the Mortgage Bankers Association’s (MBA’s) Commercial Real Estate Finance (CREF)/Multifamily Housing Convention & Expo will try to make sense of the new world facing lenders after an increase in defaults on adjustable-rate and subprime mortgages in the last half of 2007.
MBA is chaired this year by a veteran of commercial and multifamily lending instead of a single-family lending executive. Kieran Quinn is chairman of Column Financial/Credit Suisse’s mortgage lending subsidiary for multifamily and commercial properties.
Quinn predicted that the CREF conference would be a very important way for capital sources and originators to get in sync about how to underwrite specific transactions in a time of uncertainty.
“Underwriting issues are very important again,” he said. “It’s not a race to see who can get the most money and easiest terms; it’s how comfortable they are and are they going to get to the closing table,” Quinn continued.
Quinn is calling on lenders and borrowers to get back to basics, saying, “It’s a time for more patience, a little more equity, and a little longer holding period.”
As the CREF program points out, it was expected that the capital markets would eventually encounter a shock that would cause investors to reconsider their pricing of risk. But many lenders and borrowers were surprised by the speed and breadth of the impact of the nation’s home mortgage woes on financing for income-producing properties.
Here is a partial list of the sessions planned for the CREF conference.
The Music Stopped:
Who Has a Chair?
This session will look at these questions:
- How have the meltdown in the subprime market, the widening of spreads, and the credit crunch affected multifamily lending?
- Has the shock only affected financing, or have multifamily fundamentals also changed?
- Who is still lending and on what terms?
- What else could happen in 2008?
Case Studies in Financing Workforce Housing
This session will look at what role lenders can play in addressing the shortage of housing affordable to working people. It will address the need and the opportunities through the presentation of case studies of successful developments. The CREF program states that attendees will “learn innovative techniques to reduce development, financing, and operating costs to make rents affordable to working families, especially in high-cost markets.”
Green Buildings: Today’s Fad or Tomorrow’s Necessity?
A panel of experts will discuss the future of green buildings in light of the current regulatory environment, tenant demand, and construction and operating costs. Finance considerations for green buildings will also be discussed, including the potential for green commercial mortgage-backed securities.
Underwriting is King
With investor jitters over the underwriting practices of the recent past, investors, rating agencies, and lenders are taking a more conservative stance toward underwriting practices. This panel will discuss the impact of changing underwriting requirements for such items as loan amortization, loan-tovalue ratios, projected rents, tenant turnover, vacancy, operating expenses, and capital reserves.