By the end of March, we saw CRE lending come to a grinding halt as COVID took hold of the world. Fortunately, in the last few months the lending market has regained a level of fluidity. Although the market is starting to normalize to some extent, the landscape has changed indefinitely. Here are a few insights that may be useful for both borrowers and CRE professionals:

What has changed?

1. The players: some lenders are still not quoting deals. The bank that gave you a loan eight months ago may reject a deal you send them today.
2. Stricter underwriting: prior to the pandemic, a 1.20x DCR was the industry standard for multifamily properties. Now, it seems that 1.25x is the new norm and some lenders are even going as high as 1.35x. LTV constraints have changed as well - apart from agency debt, it is hard to come quotes exceeding 65% LTV. 
3. Documentation and due diligence: lenders are digging for more information before signing up a deal and during closing. Requests for delinquency reports detailing missed rent payments is now par for the course. Monthly or bi-weekly collection reports and profit and loss statements may have to be submitted throughout the closing process.
4. Terms: it is much harder to come by a non-recourse loan nowadays, and many lenders are requiring a 6-12-month payment reserve to ensure the borrower does not default in case a tenant vacates or stops paying rent.  

Some silver linings

1. Multifamily is still a safe asset class. Any lender that has started deploying capital again after the initial freeze is quoting multifamily more readily than any other asset type.
2. Interest rates are attractive. I have seen agency quotes as low as 3.03% and bank quotes as low as 3.35% in the last 30 days.
3. Change brings opportunity. Borrowers can now create new relationships with lenders they have not previously worked with
4. Agency debt: Fannie & Freddie are still offering aggressive loans and can be a great option for the right borrower.

With all the changes that have occurred over the last few months and plenty of uncertainty still looming, managing expectations and being equipped with the latest information will make it easier to navigate transactions moving forward.