LIVINGSTON, NJ-Commercial and multifamily mortgage lending on the part of life companies is currently experiencing a bit of a divide, with some lenders taking steps to widen spreads as they approach their annual lending targets, while others still seeking to fill their targets are cutting spreads to capture premium deals. 

An increase in spread lending will effectively slow the outward flow of capital. As a result, there are currently a number of life companies that have already hit their mid-year (and almost full year) real estate investment targets, or are near this number, which have opted to pull back on their investment pace. With life companies, it's largely a question as to where (and to what degree) they have chosen to allocate their funds—whether in fixed-income, equity investments or real estate. Once these firms begin to near their real estate investment targets, it's time to rein in their rate of lending.

On the other hand, a reduced spread in loan rates translates to a reduction between the cost of funds for the lender and the rate at which these funds are lent out. Lending institutions can reduce their spread in response to factors such as more competition from other creditors, less perceived risk in the lending market due to favorable economic conditions or increased liquidity in the secondary market for these loans. The life lenders who have reduced their rates want to pick the best deals and are seeking the cream of the crop.

Ultimately, spread lending represents a liquid and fluid financing market that facilitates and fosters a strong commercial real estate market. It also indicates that now is the time to start shopping around for loans once again. However, using a strong broker is key to navigating the current lending environment, which also includes a genuine resurgence in CMBS volume.

In general, CMBS has become very aggressive and active - particularly in office, retail and industrial transactions below the $100 million mark. While life companies are snapping up A-quality assets, CMBS lenders tend to acquire properties that are B-level and below. They are also being more conservative and operating off of existing cash flows and avoiding pro-forma.

With the market continuing to experience dislocation, a seasoned mortgage broker can provide the best possible loan alternatives in the market. Not all lenders are the same. The market has not yet become so competitive that lenders are all close in quoting rates and spreads. A good mortgage banker will be aware of which lenders are cutting spreads to win deals and increase loan volume and which ones have hit their 2013 targets and easing off the accelerator.

Mark Scott is president of Commercial Mortgage Capital. The views expressed in this column are the author's own.