As published in Scotsman Guide's Commercial Edition, March 2010.
Jobs recovery leading the way to overall economic and commercial real estate recovery was the key theme this past Feb. 1 to 4 in Las Vegas, where more than 2,000 commercial-mortgage-industry professionals convened for the Mortgage Bankers Association's (MBA) annual Commercial Real Estate Finance (CREF)/Multifamily Housing Convention and Expo.
Rob Story, MBA 2009-10 Chairman
According to Mortgage Bankers Association figures, the CREF convention had more than 2,000 attendees, which Chairman Rob Story says was more than the association had expected. In a post-CREF conversation, Story gave us his impression of the overall morale among attendees:
"The people who attended the conference were looking forward to 2010 and getting things back on track. There was a lot of engagement and a lot of people trying to do business. I think that those who are still in the business and who have been in the business for a number of years understand the cyclical nature of our business, and they look forward to the cycle coming back their way.
"People understand they have to be realistic in terms of the types of loans that will be acceptable in today’s environment in terms of today’s underwriting guidelines and such. You also see borrowers starting to understand that — and that was one of the biggest problems, for the borrowers to understand that this is the business now versus what you had a couple years ago. The people who understand the business and have been in it for quite a while see that there’s an appetite from investors but it’s for a different sort of deal going through."
— Ivanna C. Sukkar
"The biggest problems have already been seen for unemployment," said Jay Brinkmann, MBA's chief economist and senior vice president for research and economics, during the conference.
With about 2.7 million jobs lost since the trough of the recent U.S. recession, there now are fewer unemployment claims, he said.
In various breakout sessions, conference attendees discussed property fundamentals, government lending, how to deal with distressed assets and myths surrounding bank lending today, among other topics.
To view selected presentations from the 2010 MBA CREF/Multifamily Housing Convention and Expo, visit sctsm.in/sessions10.
Here's a breakdown of four CREF sessions of note.
We're from the Government and We're Here to Help You
When: 2 to 3:15 p.m., Feb. 2
Marie D. Head, president and CEO, Prudential Huntoon Paige (moderator)
Carol Galante, deputy assistant for multifamily housing, U.S. Department of Housing and Urban Development (HUD)
What: The Federal Housing Administration (FHA) has plans in the works to revise underwriting standards for its multifamily program, according to Galante, who outlined the proposed changes in this standing-room-only session.
Changes are still tentative. But if passed, they would increase the minimum required debt-service-coverage ratios (DSCRs) and increase the required amount of working capital for the FHA's Section 221(d)(4). DSCRs also would be increased for the Section 223(f) program.
Many session attendees were critical of the proposed changes and expressed concern that they would make FHA's multifamily programs out-of-reach to more multifamily-developer borrowers.
Although the FHA programs have not seen the same volume of losses in its programs as other, more-traditional lending programs, the administration is concerned with weaknesses it sees in the program and market weakness, Galante said. She cited a FHA-multifamily-volume increase of more than 487 percent in the past 15 months and a doubling in claim rates on risk-sharing loans from 2007 to '09.
"It's hard to justify not doing anything," Galante said.
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