Fannie Mae and Freddie Mac say the declining condition of commercial properties is one of the biggest challenges facing multifamily servicers today.
"Our top shared concern is really all about physical risk," said Karyn Sandelman, portfolio services director for Freddie Mac, speaking at the Mortgage Bankers Association (MBA) conference in New York. "We have declining cash flows and overextended borrowers and an unwillingness to take care of the real estate."
Fannie Mae is conducting onsite inspections to deal with the problem. "We are concerned about the health of our servicers," added Caroline Blakely, vice president, Fannie Mae. Also, so-called watch lists on problem loans are growing in size.
Robert Shean, chief operating officer of M&T Realty Corp., listed loan maturity management as a third hot topic for servicers. He says it causes him "a lot of sleepless nights," adding that "balloons [mortgages] are facing their maturity dates. While the flow of maturing loans isn't particularly overwhelming [presently], when you look out over the next few years, we all know we're in for a rough ride."
Wells Fargo is trying to be proactive on CRE problems, said Maureen Fitzgerald, senior vice president of the bank. Wells is staffing up while reducing the number of loans per asset manager. The bank also is hiring experienced managers with "more expertise" to handle watch lists. Such employees come at a higher price tag because they are "more mature," Fitzgerald told the conference.