Why do agency lenders appear to beat the banks when it comes to multifamily lending?

I noticed that when it comes to multifamily lending, agency lenders like Berkadia, Walker and Dunlop, Berkeley Point Capital , Greystone, CBRE, etc are often ahead of most big banks when it comes to multifamily lending. When you look at the top 10 list of multifamily lenders nationally by volume under both Freddie and Fannie, the only banks that are on both lists are Key Bank, Capital One and Wells Fargo. Seven of the top 10 are agency lenders. Is there a reason that banks like JP Morgan, Citi, Bank of America cannot compete with the agency lenders? Is it pricing, customer service, etc?

Thank you!!!

 
Best Response

Rebates, rebates and rebates!!! Agency lenders pursue broker business because brokers are the heart and soul of about 80% of loan origination. Wells has great rates but offers no rebates. Same with nearly every other big bank. Plus a lender like Wells, who is pretty aggressive on rate and will lend an assets that surprise me, offers virtually zero cash out.

I just did three loans with Hunt on their Fannie side. One borrower, 6.5mil and nearly all of it was cash out. That is not happening with a ton of banks. And I got .75pt rebate.

Also, agency lenders will overlook some legal issues that borrowers have pending so long as it does not affect the collateral of the loan. If you have pending litigation or a previous chapter 11 BK, you will not pass a conventional banks Level II background check.

I really could go on and on.

I use agency debt and then regional bank and CU debt the most for clients deals. Chase the likes of them, I just find too many reasons to send my deals elsewhere.

 

Thank you for the response! Appreciate it! I am a newbie, so bare with me, when you say you got a .75% rebate, is that you as a broker getting .75 percent of the loan amount as a broker fee for bring the business to Hunt?

Curious, what is considered average/typical broker fee? And what do you think the originator at Hunt received as a bonus? Would it be higher or lower than your .75%?

Last q- it appears to me that originations and underwriting folks at agency lenders earn more than their counterparts at big banks, any reason why? Thank you!

 

I work at CB in SBL lending ($1-$7 million MF loans) and we do almost solely Freddie deals. In addition to the above comment from PacNumber, it also has to do with the screening process. While Chase bank is huge in the SBL space and offers rates just as competitive as us and the rest of the seller/servicers, it is a less cumbersome process for a borrower to go through us, in terms of the credit check, etc.

 

Hi!, it appears to me that originations and underwriting folks at agency lenders earn more than their counterparts at big banks, do you feel the same? any reason why? Thank you!

I know that @PacNumber has mentioned in the past that underwriters at banks dont make anywhere near agency shops.

 

I work in originations for one of the larger Fannie/Freddie direct lenders (DUS and SS). In addition, we are also a very active brokerage for non-agency executions placing lifeco, bank, pref equity, and debt fund business. There are a few reasons why the agencies originate so much volume.

1) Both FNMA and FMAC have annual quotas for conventional, workforce, green, and affordable business. These quasi-government institutions have missions to provide liquidity for housing in America. I can’t emphasis this point enough.

2) New bank regulations, High Volatility CRE (HVCRE) categorizations on banks. Some banks are marking non-stabilized properties as HVCRE. HVCRE loans demand a 1.5x capital reserve requirement compared to stabilized assets. This has significantly increased the cost of capital for value-add deals.

3) Unlike banks or lifeco’s, Agencies don’t have sponsor caps. For example, Wells may cap a sponsor to a max unpaid balance of $100MM.

4) Standardized and negotiated loan docs. Acquisition timelines have been very aggressive as of late. Once docs are hammered through on the first execution, repeat sponsors only need to have the property u/w. This can save weeks and many headaches during your DD and equity raising time.

5) The agencies dominate the 7 and 10 year fixed and floating rate options for A- to C+ assets in top 50 markets. Lifeco’s will be very competitive for A+ to A properties in tier 1 markets, but only to 70% LTV. Banks are very competitive on the shorter-term stuff, 1-5 years.

 

Hi! Thank you so much for the insight! I have a question about originations. I am applying for entry level originations positions at agency lenders. I want to learn more about what do you do versus underwriting at more a granular level.

How is the cash flow analysis, modeling different to what an underwriter will do versus what you will do? arent you also modeling out cash flows to determine NOI and subsequently max loan amounts? Does the underwriter do a more in depth feasibility analysis and keep track of third party reports and analyse demographics and economic conditions in more in depth.

Any top skills that an originator should require vs an underwriter? Thank you!!

 

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