Amid economic uncertainty and higher interest rates, lenders remain active in finding solutions for their multifamily borrowers and are cautiously optimistic about the second half of the year.
Commercial and multifamily mortgage loan originations started off strong for 2025, with a 42% year-over-year increase in the first quarter, according to the Mortgage Bankers Association (MBA). Alone, originations for multifamily properties increased 39% year over year.
“Commercial and multifamily mortgage originations posted a strong rebound in the first three months of the year, increasing 42% compared to year-ago levels,” said Reggie Booker, MBA’s associate vice president of commercial research. “The first quarter of the year is typically the slowest, so this level of activity—particularly the strong gains in office, health care, and multifamily lending—signals renewed momentum and growing confidence in key segments of the market. Despite ongoing volatility in interest rates and the broader financial markets, borrowers and lenders are finding opportunities to move new deals forward.”
Stephanie Wiggins, head of agency and Federal Housing Administration (FHA) production at PGIM Real Estate, and Jim Flynn, CEO of Lument, say one of the drivers of increased lending activity has been the uptick in acquisitions.
“Despite pockets of uncertainty as it pertains to market volatility, interest rates, and inflationary pressures, we will continue to charge ahead this year,” says Wiggins. “We’re seeing investment sales activity, a significant driver of agency business, pick up slowly but surely. This dynamic, tempered somewhat by volatility in the capital markets, has us feeling good about how the year will play out.”
As the gap between buyers and sellers closes, Flynn says he thinks acquisitions will continue to pick up. “Institutional capital has returned to the market in a big way,” he notes. “On a quarterly basis, institutional transaction volume since the start of 2024 has averaged 42% higher than in 2023. Although this was down during the first quarter of 2025, it’s unclear how much of the dip is due to normal seasonal fluctuations versus uncertainty about the economy.”
Government-sponsored enterprises Fannie Mae and Freddie Mac as well as FHA have continued to be a source of stability for multifamily borrowers this year.
“The agencies and FHA have upheld their role of providing liquidity and stability in an otherwise volatile market environment. Leadership at the agencies is focused on buckling down and getting good business done, and they are seeing record inflows as a result,” says Wiggins. “The agencies and FHA have also taken intentional steps this year to make their processes more efficient for borrowers, which is evidenced by the Federal Housing Finance Agency rescinding its 2022 radon policy, FHA focusing opportunities to reduce overly burdensome environmental requirements, and both placing a priority on their staff returning to the office. This combined with the agencies leaning into their pre-stabilized programs, I believe speaks to their eagerness and enthusiasm around getting deals done despite market volatility.”
Flynn says a notable shift seen so far this year is the commercial mortgage-backed securities (CMBS) market pulling back significantly after being a driving force in 2024, adding the agencies are taking up some of the slack. “In the first quarter, agency volume increased 16% compared with the same period last year. Yet as cap rates stabilize, we expect CMBS velocity to increase,” he says.
Wiggins shares the most important factor in today’s environment is to continuously educate borrowers on market conditions and manage expectations accordingly. PGIM also is mitigating interest rate risk for its borrowers in several ways: getting deals prepared to lock as soon as there is a spread compression; early rate-locking with Fannie Mae, Freddie Mac, and FHA; and by buying down rates where it makes sense.
Overall, Flynn says there’s no shortage of capital for borrowers. However, it’s more of a question of selecting the most appropriate capital.
“Borrowers are increasingly looking to work with lenders who can clear the full market in terms of traditional and nontraditional lending sources. That’s why Lument has expanded its debt capital markets group, giving borrowers options for deals that might not check the boxes for agency financing,” he says. “And since uncertainty about rates is higher than usual, many borrowers are also asking for flexibility on the back end of their loans.”
For borrowers with maturing loans coming due, Flynn advises to begin preparing for refinancing earlier than they have in the past. He says issues that had never been problems previously, such as insurance, can now hold up deals at the last minute. He recommends that borrowers work with their insurance brokers and implement risk mitigation strategies to lower their premiums.
“Borrowers should expand their capital networks and cultivate relationships with potential equity partners. This will give them alternatives in cases where their deals are not cash neutral,” he says. “Most important, borrowers should engage with existing lenders early to increase the likelihood of cooperation should issues arise later.”
Wiggins agrees about starting conversations early. “Know that pushing pause isn’t always the best strategy, and when rates do tick down, we need to be ready to move,” she adds.
Looking ahead, even with the uncertainty and volatility, Lument will continue to be measured and thoughtful about its lending, monitoring the economy closely but being careful not to overreact to sudden shifts. Flynn says rapidly changing regulatory and policy matters, including tariffs, concern him domestically.
“In my view, the tariff rates that the Trump administration has set are bargaining chips. At the end of the day, I think tariffs will be higher overall than they have been in the past, but not as high as they are right now,” he adds. “I am more concerned about geopolitical turmoil that could suddenly ripple through the economy. This could include a flare-up of the war in Ukraine or a more aggressive Chinese stance toward Taiwan. Further deterioration in India-Pakistan relations could add more fuel to that concern.”
Wiggins says her biggest concern is that uncertainty around market conditions causes borrowers to pause. “Of course we are upping our due diligence and taking all economic factors into consideration when determining whether a deal will pencil, but it is ultimately our job as trusted advisers to provide borrowers with a sense of security and some guidance through the broader uncertainty,” she adds.
