Moderator Jeffrey Erxleben, EVP of NorthMarq Capital LLC, asked the panelists if they expect fixed-or floating-rate loans to be a pattern for borrowers this year, and Evans said that fixed-rate is the Fannie Mae's sweet spot, accounting for 80% of its business. With that being said, “We need to be able to provide a level of flexibility borrowers are looking for,” Evans commented, adding that we will continue to see fixed activity for some time. Cannon agreed.

Rocco said a flattening yield curve will provide a trend toward fixed, and the market is “as good as it's going to get.” He added that select groups of borrowers are going longer than 10 years in their loan terms, but middle-market buyers like seven-year loans with two one-year extensions. Essentially, seven to 10 years is the average, with lots of pre-pay facilities.

Erxleben said with multifamily vacancy rates down and rents and valuations up, do the panelists see the market as stable? Evans says she looks at new construction, and with 381,000 units brought into the market in 2017 and 400,000 units expected this year, the sector can sustain this in certain markets. However, in markets like New York, DC and L.A., there may be some oversupply with a correction expected in 12 to 18 months. Nevertheless, on the whole, market fundamentals are strong and stable.

Cannon agreed, adding that the market is not producing enough housing. “Household formations and job growth should be strong. We are bullish in our short- and long-term view on multifamily fundamentals.”

Rocco agreed as well, but said there is one exception: buyers are taking an equity risk. “We will see pullback in some markets, but not enough to change the landscape.” He added that he didn't foresee any Black Swan event.

Erxleben asked about the affordable-housing sector, and Evans said Fannie Mae did approximately $5.4 billion in the 60%-below-AMI segment of affordable in 2017. She said 43% of low-income rents are spending 50% of their income on rent, which is not sustainable. Fannie Mae will address this with products and product enhancements to sustain affordable-housing product in the market—products like Green and Healthy Housing Rewards translate into savings to tenants. “We have to incrementally keep doing as much as we can to continue to make improvements” to its products, she said.

Regarding the lending forecast, Rocco said that debt funds are no longer blind lenders. Companies are creating funds and trying to manage expectations by creating verticals to compete in multifamily. He stressed that they are not trying to compete with the agencies, and we will see a lot of consolidation in 2019 and 2020 as the market sorts this out.

Evans said it's good to have these additional lenders coming into the market. “Healthy competition is good.”

Erxleben asked how the role of the seller/servicer and mortgage banker has changed, and Cannon said that person used to be the eyes and ears for the market—the guide for properties—but today, that value proposition is different. “Borrowers need the mortgage banker to understand mortgage products and explain the value of each to the borrower. It's less about property knowledge.”

Evans agreed, adding, “Mortgage bankers must get deep into the products. They need to understand them in order to sell them effectively.

Looking ahead, Evans said Fannie Mae will be looking at opportunities to tweak its existing product lines and make sure lenders understand all the products that are available to them. Cannon said technology needs to be able to make the lending process faster, and Evans said the CRE industry is incredibly ripe for disruption. “Rocket Mortgage is not here yet, but it's coming. In five years, things will be very different.

There will always be a human touch to this business, but technology is needed to cut costs down; there's a huge opportunity in technology.

Rocco agreed, adding that we should expect foreign disintermediation that will provide increasing transparency and efficiency to the lending process, particularly on the origination side. Technology should cut out some of the inefficiencies that delay lending and don't truly add value, such as incremental inspections and extra rent rolls.

Cannon said terms are dropping, and borrowers are not holding onto property for as long—they want pre-payment flexibility so they have liquidity. Evans said, “I agree, but there must be an investor willing to buy that paper—the investor piece is important.”