Why is Agency lending exploding in activity?
Excuse the ignorance, why are Agency lenders able to continue getting deals done and are hitting massive and outsized transaction volume?
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I would not say exploding, volume is just fine. Ask the experienced agency professionals, they would tell you they have seen years where volume was definitely better. Early this year there were some serious concerns whether the agencies would be able to hit their targets which were already increased compared to last year. Now, it is a little better but if they reach their targets they might still just barely get there. They will definitely hit their affordability targets though.
In terms of how agencies get deals done, agencies have close to 50% market share for multifamily properties. So there aren't too many options for capital providers especially if one wants non recourse long term fixed rate debt. Local banks are always an option but they often have shorter loan terms with full or partial recourse and if non recourse is an option, their leverage will be super low and not at the 70-80% levels that agencies can quote. For value add deals and bridge debt, agencies may not be a fit but for stabilized properties, agencies will be very competitive.
Apologies for question. Am a noob.How are agencies able to quote at this level? Are they tied to amortizing DSCR and LTV? I thought agencies could only quote if there was an affordability component to the asset?Where do they get their rates from?
https://www.walkerdunlop.com/insights/2021/08/16/why-you-should-conside…
After reading the above, how can agencies quote on deals and win if say a non bank lender is also quoting the deal? What makes the agency debt attractive in comparison to say a lifeco?
I know you commented this two years ago but you seem t be an expert so ill ask you this - Given the current market dynamics, do you think it’s a good time to get into the agency lending space? With the potential privatization of Freddie and Fannie Mae, do you expect transaction volume to pick up
The space is very crowded if you were trying to come in as a young originator. Transaction volume is picking up, but the deals that are going agency today are either legacy clients with deals coming up on their 5 - 10 yr natural maturity, or new acquisitions from well capitalized groups that are comfortable getting 55% - 65% LTV loans and can raise the 35% - 45% equity slug. Both borrower profile is often already well entrenched with an existing agency lender relationship, so established bankers will continue to do well.
If you have the opportunity to join an existing team that has deal flow, this is still a great space to be. If you are an aspiring producer, there is still an opportunity here but it's a fucking slog right now.
Will add that the typical heartburn that comes with doing an agency deal is amplified these days with additional scrutiny / looming privatization
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