Over the last several years the larger banks have dominated the multifamily lending market. It seems like Chase was the first lender on the list any time a multifamily deal came into our brokerage. If not Chase, then it was a similar large bank, and the smaller local banks were typically an afterthought. COVID has changed all of that. The big banks that previously had a bit of a stranglehold on the multifamily market are now busy dealing with forbearance and other issues brought on by the pandemic and are no longer offering the most aggressive terms.

Nowadays, agency loans (mortgages offered by Fannie Mae and Freddie Mac) are the hottest thing on the market. They are offering historically low rates and high LTV’s along with other attractive terms that make taking the agency route an easy decision. However, there is a void to be filled for multifamily loans that do not meet the agency criteria – and the community banks are filling that void.

9 months ago, those loans that couldn’t go the agency route but were still considered good, clean deals would be snatched up by a big bank. Now that those banks are no longer aggressive in the multifamily market, the community banks have an opportunity to step up and grab those deals. And for many borrowers, these community banks will provide some extra advantages. For one, community banks lack the strict rigidity of larger banks. They often have a little more wiggle room when making deals and will get a little bit more creative for their clients – this could mean increasing their LTV limit by a couple points or lowering the interest rate, or offering a line of credit. Another advantage is that local banks know their area well and are often more comfortable taking risks in their own backyard. They are invested in the success of their local economy and because of that, they are more likely to lend on a property that is not in the most desirable part of town. Thirdly, although many borrowers are hesitant to move money and make deposits, community banks will typically get especially aggressive in their loan terms for clients that open accounts with them and form banking relationships. Another point in favor of community banks is their customer service. Their loan process is likely to be less complicated than that of a larger bank, and chances are you will be dealing with the same person every time you contact the bank.

As lenders continue to find their way through this pandemic and figure out what their programs will look like moving forward, borrowers have the opportunity to form new lending relationships with local community banks. For all the borrowers and CRE professionals seeking multifamily loans and wondering what lender to go to – your best option could literally be just around the corner.