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The Fed’s commitment to open-market operations in response to COVID-19 have stabilized interest rates at all time lows. The yield on the US 10 Yr has stayed within a tight 15 basis points over the past 30 days, ranging from 0.58% to 0.73%. Despite the stability, agency MBS buyers (including the Fed) are still holding the floor, keeping rates on commercial real estate loans from falling further. Overall, interest rates on commercial Ginnie Mae MBS have come down a bit since our last update.   Check out today’s rates.

FHA Commercial Loan Rate Update – May 15, 2020

• 35-year fixed FHA perm loans: 2.45%-2.60%
• 40-year fixed FHA construction/perm loans: 3.15%-3.40% 

These pricing indications are current as of the date posted, subject to market interest rate volatility.  Pricing of FHA insured apartment and healthcare loans may be dependent on loan size and other risk factors. Call for more information.

Interested in learning more about FHA's attractive 223(f) refinance loan program?
Click to learn more!

U.S. Department of Housing & Urban Development (HUD) has just implemented debt service reserve requirements on 223(f) refinance and acquisition loans for existing multifamily properties in response to the economic instability and increased risk environment caused by COVID-19.  This requirement will remain in effect until such time HUD deems the associated risks mitigated.

Generally, under the new rules, a 9-month reserve will now be required on market rate projects and up to a 12-month reserve will be required on affordable projects. LIHTC projects with similar reserve facilities required by the tax credit investor that are available to cover the HUD loan debt service requirements may offset the HUD debt serve reserve requirement, subject to HUD approval on a case by case basis.  Projects with Section 8 project-based rental assistance covering greater than 90% of units will be exempt from the debt service requirement.  The debt service reserve will be eligible for release 6 months post-closing after the project achieves 3 consecutive months of underwritten debt service coverage.

Additional details are provided in the formal HUD publication: HUD Mortgagee Letter 2020-11.  Give us a call for more information or to learn more about HUD loan programs. 

Interested in learning more about FHA's attractive 223(f) refinance loan program?
Click to learn more!

The Fed has taken extraordinary steps to provide liquidity in the market through the expansion of its QE policies in response to the fallout from the novel Coronavirus.  The Fed tossed its previous commitment to purchase $700 billion in Treasuries and agency MBS in favor of an open-ended program, pledging asset purchases with no limit to support markets.  With the acceleration of Treasury and agency MBS purchases, the Fed’s balance sheet has ballooned to record levels, now above $5 trillion. The immediate impact on interest rates have been positive as spreads have come down, although the situation remains fluid.  Check out today’s rates.

FHA Commercial Loan Rate Update – April 03, 2020

• 35-year fixed FHA perm loans: 2.60%-2.85%
• 40-year fixed FHA construction/perm loans: 3.35%-3.60% 

These pricing indications are current as of the date posted, subject to market interest rate volatility.  Pricing of FHA insured apartment and healthcare loans may be dependent on loan size and other risk factors. Call for more information.

Interested in learning more about FHA's attractive 223(f) refinance loan program?
Click to learn more!

The Trump administration is pushing for a $1.2 trillion stimulus package to ease the economic impact from the coronavirus outbreak. You can bet other countries around the world are watching closely and may follow suit to deal with their own economic issues.  All this massive government spending will be fueled by long-term government debt.

How will the deluge of new supply of debt impact interest rates? 

Like most commodities, the yield on fixed income securities tend to rise and fall based on supply and demand.  Someone needs to buy up all those fixed income debt securities to fund deficit spending.  Any time you have more supply than demand, it’s a buyer’s market.  Here, with the glut of debt heading to the market and only so much funds to allocate, it's the fixed income investors who are the buyers who can demand higher interest rates.

The wild card here is the Fed.  Earlier in the week, the Fed resumed its quantitative easing (QE) program, with a commitment to purchase $500 billion in U.S. Treasuries and $200 billion in agency MBS.  Will that be enough?  Does the Fed have the appetite or capacity to take on more?  Stay tuned.

FHA COMMERCIAL RATE UPDATE: MARCH 18, 2020

Concerns regarding an oversupply pushing interest rates higher are weighing on investors’ minds.  The yield on the U.S. 10-yr has increased dramatically over the past 2 days as it touched 1.22%, up from 0.65% on Monday.  With the huge volatility in the market, spreads have widened considerably.

Today’s pricing:

• 35-year fixed FHA perm loans: 2.90%-3.15%
• 40-year fixed FHA construction/perm loans: 3.75%-4.00% 

These pricing indications are current as of the date posted, subject to market interest rate volatility.  Pricing of FHA insured apartment and healthcare loans may be dependent on loan size and other risk factors. Call for more information.

Interested in learning more about FHA's attractive 223(f) refinance loan program?
Click to learn more!

U.S. Department of Housing & Urban Development (HUD) announced this week that it has revised its long-held policy requiring a three-year wait period following construction completion before accepting HUD-insured refinance applications for multifamily properties.  Under the new rules recently constructed multifamily properties are now eligible for a HUD 223(f) refinance upon achieving stabilization. 

Eligible properties must achieve the underwritten income and expense levels and debt service coverage ratio for a period of at least three consecutive months prior to closing.  Cash-out refinances have the additional limitation requiring a 50% hold-back until the project achieves six months consecutive performance at these levels.   The full details are published in Mortgagee Letter 2020-03. 

The HUD 221(d)4 loan has traditionally been one of best new construction/sub-rehab loans available in the market, with its long-term, low interest rate financing covering up to 90% of development cost.  However, its Achilles heel has been its Davis Bacon wage requirements along with longer processing time which have discouraged some developers. With the elimination of the 3-year rule for multifamily properties, conventionally financed developments can still benefit from HUD's attractive long-term, low interest rate financing.

Give us a call for more information or to learn how HUD loan programs can benefit your real estate investment. 

Coronavirus fears are driving markets. This morning, the Dow was down to 26,009.03 – approximately 3,000 points or 10% over the past 6 days. Yields on the US 10 Yr hit a new record low below 1.25%. The markets have begun to price in 3 Fed rate cuts in 2020. However spreads have widened as the market weighs the longer term implications.  

Today’s pricing:

• 35-year fixed FHA perm loans: 2.75%-3.00%
• 40-year fixed FHA construction/perm loans: 3.30%-3.55% 

These pricing indications are current as of the date posted, subject to market interest rate volatility.  Pricing of FHA insured apartment and healthcare loans may be dependent on loan size and other risk factors. Call for more information.

Interested in learning more about FHA's attractive 223(f) refinance loan program?
Click to learn more!

The number of coronavirus cases outside China surged over the weekend which roiled markets on Monday.  The Dow closed down 1,031 points or 3.5% while the yield on the U.S. 10-year closed at record lows as investors flocked to safer assets.  A Fed rate cut – perhaps two before year-end – is now an increasing possibility. Spreads have widened with the sudden movement in the markets, although rates are generally down. 

Today’s pricing:

• 35-year fixed FHA perm loans: 2.75%-3.00%
• 40-year fixed FHA construction/perm loans: 3.30%-3.55% 

These pricing indications are current as of the date posted, subject to market interest rate volatility.  Pricing of FHA insured apartment and healthcare loans may be dependent on loan size and other risk factors.  Call for more information.

Interested in learning about FHA's attractive 221(d)4 new construction loan program?
Click to learn more!

Geopolitical concerns surrounding the U.S.-China trade war and the U.S.-Iran conflict have been put on the back-burner.  Taking the spotlight now is the deadly coronavirus outbreak which has investors spooked over the impact to global economic growth.   As equities markets have taken a dive, increasing demand for safer assets has driven the U.S. 10-year down to its lowest level in more than three months.   The new year has also brought more fixed-income investors back to the table further driving interest rates down.

Today’s pricing:

• 35-year fixed FHA insured loans: 2.90%-3.15%
• 40-year fixed FHA construction/perm loans: 3.45%-3.70% 

These pricing indications are current as of the date posted, subject to market interest rate volatility.  Pricing of FHA insured apartment and healthcare loans may be dependent on loan size and other risk factors.  Call for more information.

The announcement this past Friday by U.S. and Chinese officials of a phase one trade deal have calmed markets, removing the risk of an all-out trade war from the equation, at least for the time being.  The equities market has responded with all major indexes rising, including the Dow Jones which reached a new record high.  The U.S. 10-year is now up approximately 40 basis points from its low in August.   As noted in this space previously, spreads on agency debt initially widened out when the yield U.S. 10-yr started falling hard over concerns of a U.S.-China trade war.  Despite the recent rise in the U.S. 10-yr, rates on agency debt have held relatively steady with compression in spreads. It will be interesting to watch interest rates moving forward.  

Today’s pricing:

• 35-year fixed FHA insured loans: 3.20%-3.45%
• 40-year fixed FHA construction/perm loans: 3.80%-4.05% 

These pricing indications are current as of the date posted, subject to market interest rate volatility.  Pricing of FHA insured apartment and healthcare loans may be dependent on loan size and other risk factors.  Call for more information.

The Fed Reserve’s third interest rate cut this year paired with strong earnings and growing optimism on the U.S.-China trade negotiations has buoyed the equity markets.  The Dow is now up 18% on the year and in record territory. A December rate-cut is looking less probable.  The yield on the U.S. 10-Yr is 1.78%, up almost 30- basis points from a month ago.

Despite the uptick in the 10-Yr, compression in spreads have kept FHA interest rates relatively stable. 

Today’s pricing:

• 35-year fixed FHA insured loans: 3.05%-3.30%
• 40-year fixed FHA construction/perm loans: 3.65%-3.90% 

These pricing indications are current as of the date posted, subject to market interest rate volatility.  Pricing of FHA insured apartment and healthcare loans may be dependent on loan size and other risk factors.  Call for more information.