Major commercial banks have shut down their multifamily lending for most of 2009. So have insurance companies. But contrary to popular belief, Fannie Mae and Freddie Mac are not the only ones taking on multifamily loans. There’s a group of small and local banks out there looking to maintain and increase their allocations for apartment properties.

“The financing is still available,” says Ernie Freedman, deputy CFO for Denver-based REIT AIMCO. “It’s not just from the agencies, but we’re seeing local and community banks showing interest in lending multifamily products. Those banks seem to have weathered the storm, and they have money to lend.”

While the most recent data from the Mortgage Bankers Association only covers first-quarter results from some banks, the figures show multifamily lending increasing. First-quarter reporting from some smaller banks backs this assertion. For instance, Provident Financial Services in Jersey City, N.J., saw net increases of $34.9 million in commercial and multifamily mortgage loans. The Bank of Smithtown in Hauppauge, N.Y., says multifamily loans were its largest area of growth, growing $56 million during the first quarter and now comprising 20 percent of the bank's loan portfolio. Kearny Financial Corp. in Fairfield, N.J., saw its multifamily mortgages increase to $5.3 million in the first quarter.

“It was a concerted effort [to increase multifamily lending], as well as big boys not doing the loans anymore,” says Patrick Joyce, a senior vice president and chief lending officer with Kearny. “We saw an opportunity there.”

Joyce says that Kearny holds everything on its portfolio and typically does balloon loans and some arms in a 10-year range with a 20-year payout. These are the same products it was offering at the height of the market. “We have not changed our underwriting criteria one bit,” he says. “We’ve always been a conservative shop through good times and bad times.”

In fact, even some of the biggest players in the industry, like AIMCO, which owns about 115,000 units, are looking at local lenders. “As we're trying to re-focus our own portfolio, we’re starting to have contact with local folks,” Freedman says. “They’re willing to lend outside of their locality. On certain assets, we’ll see if it’s an option that’s available and compare it to what the agencies are offering.”

While Joyce hasn’t been seeing the AIMCOs of the world, he would definitely talk to them, provided they want to buy in the New Jersey area. In fact, Kearny is actually planning on adding more multifamily lending specialists and lending more than it did in the first quarter.