Apartment Builders Stymied by Wait for US Government Loans

We recently posted a link to an article about GSE’s trying to get more private sector action for the single family market and in that story there was mention of Freddie Mac’s earlier efforts to do the same in multifamily.  According to this article it looks like there might be a need to get more aggressive:

A surge in single-family foreclosures combined with tighter credit markets has given the federal government a dramatically expanded role in financing new construction and rehabilitation of multifamily units.

The result is a backlog of applications. Government officials and developers say the FHA — constrained by government austerity — has had a tough time handling the demands of its new role as a cornerstone of apartment lending.

Government-sponsored enterprises including Fannie Mae and Freddie Mac now hold 41 percentof outstanding multifamily mortgage debt, up from 34 percent in 2008, according to the Mortgage Bankers Association. And the FHA expects to endorse a record $12 billion in multifamily loans in fiscal year 2011, up from about $2 billion in 2008…

As its loan volume has quadrupled, the number of FHA staff devoted to multifamily loans has dropped through attrition to 1,414 nationwide, down 13 percent since 2005. In addition, the agency tightened underwriting standards last year and began requiring more documentation.

These factors have created a traffic jam of loans waiting for approval, according to David B. Cardwell, a vice president of the National Multi Housing Council, a Washington trade group representing apartment builders. Loans that should take 60 to 90 days are delayed as long as 18 months. Builders have told the group they are frustrated by the difficulty of determining the status of their loan applications and with the lengthy approval process, complicated by tighter underwriting…

Reliance on the government isn’t likely to decrease any time soon, Cardwell said. The Mortgage Bankers Association reported last week that outstanding commercial and multi-family mortgage debt increased in the second quarter of this year for the first time in seven quarters. Government agencies increased their holdings of multifamily mortgages by $4 billion, while commercial banks increased their holdings by just $1 billion.

“The dominance of the government participation in the market is still a major component of owners’ access to reliable debt,” Cardwell said. “I think that our members and the industry as a whole still have some concern about the way banks are going to respond to the current and near-term economic conditions.”

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