LOS ANGELES-Lenders large and small are trying to muscle their way into the busy multifamily market, yet Fannie Mae and Freddie Mac seem poised to remain the dominant lenders to the rental housing industry, according to industry experts at RealShare Apartments 2011 Thursday. The RealShare Conference Series is produced by ALM's Real Estate Media Group, which also publishes Real Estate Forum and GlobeSt.com.

Among those lenders are life insurance companies, commercial banks, bridge lenders, CMBS and small, local banks in “tertiary” markets. All are vying for a bigger share of the multifamily lending market, which is expected to reach $60 billion to $70 billion this year.

The continued starring role of Fannie and Freddie may surprise people who have been following the political firestorm surrounding the two mortgage-securitizing agencies, which were bailed at taxpayer expense in 2008. Both industry critics and elected officials have called for the privatization of the home financing agencies, to prevent further government rescues for the two agencies, which together represent about 70% of all multifamily financings.

Political gridlock, however, rather than policy considerations, will prevent any major change occurring big agencies, according to Jay Blasberg, executive vice president of Alliant Capital LLC. Any new legislation affecting Fannie and Freddie, he added, is likely to be “cosmetic.” 

Opportunities for smaller lenders exist particularly in class B and C properties, according to William Hughes, senior vice president at Marcus & Millichap Capital Corp. “Life companies are typically going for the best-of-class assets” such as rental complexes located in gateway cities and “NFL communities,” he added.

CMBS is another option for multifamily loans, according to Hughes. Many investors, however, may shy away from CMBS because they are typically unable to lock in interest rates until a few days before lender approves the loan package. 

Current low interest rates are driving a wave of refinancing, according to Jeff Burn, a senior vice president at Walker & Dunlop. “With interest rates dipping on 10-year (Treasuries), there’s been a gold rush to refinance,” he said.  Investors with loans set to mature in 12-year deals are often willing to pay prepayment penalties to shed old loans and lock in lower rates.

And while many borrowers prefer the safety and predictability of fixed-rate loans, some lenders are offering adjustable-rate loans. Adjustables may be particularly attractive to investors when prepayment terms are low enough to make it attractive for investors jumping to a fixed-rate loan with even lower rates, said Jim Hensley, a principal in Prudential Johnson Apartment Capital Express.