October 9, 2015 -- Welcome to the fourth quarter. I like the fall. The weather in Washington, DC is better than mid-summer and there's football, playoff baseball, Halloween and Thanksgiving. You can watch the leaves change, if you're into that sort of thing.

Honestly though, I miss the beginning of the third quarter. In July our baseball team hadn't yet melted down. Our football team's meltdown was widely predicted, but there were still faint glimmers of (naive) hope. The leaves were still green, and so were our 401ks. On the financial front, everyone knew the Fed was going to liftoff in September (in mid-July, Fed Funds Futures priced in nearly 50% likelihood of a rate move in September). Stocks were slightly up on the year, the 10-year was at 2.35 and you could get a 10-year DUS loan done for an all-in rate of 4.85 or less. Things felt pretty good. Lenders were happy when they called us. Investors wanted to buy bonds whenever we asked -- there was so much investor competition that Lenders could set Borrower expectations easily and accurately -- the market wasn't moving around too much.

Things started to unravel a bit in August. Equities and credit suffered on the back of bad economic news globally. August is always slow, right? The hope was that September would bring investors back from vacation to stabilize markets.

"Dammit, Janet!" When the Fed didn't move last month, investors went on strike. It's easiest to see in the equity markets, where we're now down nearly 7% on the year and more than 4% from just a month ago. Bond markets have seen a similar exodus -- with investors flocking to the relative safety of US Treasuries and credit spreads deteriorating (widening) across nearly every type of risky asset. Closest to home, yield spreads on 10-year AAA CMBS were around 90 basis points in early July and now stand at 120 basis points. BBB- CMBS are even rougher, out more than 100 basis points over the same period. That's led CMBS issuers to widen out lending spreads dramatically and to push out the calendar on their September deals.

All this uncertainty makes it very challenging to get loans rate locked. DON'T GIVE UP HOPE! (Unless you're a DC sports fan.) All-in rates are still low -- 10-year coupons are actually a few basis points lower than they were a few months ago -- hovering around 4.75 for 10/9.5s today. Liquidity is solid -- we continue to see strong competition from broker/dealers for Fannie Mae Multifamily MBS. Fannie Mae's Capital Markets Desk is here to provide liquidity for our Lenders and Borrowers and we will continue to be here, throughout the fourth quarter.

When uncertainty increases, investors seek out safe haven assets. Within the commercial real estate spectrum, Fannie Mae Multifamily MBS stand out with their guaranty, underwriting quality, and lender risk sharing -- setting them apart as the only products that align the interests of the Borrower, the Lender, and the Investor. That alignment helps get us certainty of execution in a tough market. That doesn't mean that current market conditions are easy, quite the contrary. It does mean that, working together, we can offer our borrowers much more certain execution than competing products.

Enjoy the fall, let us know how we can help.


Josh Seiff

Vice President, Multifamily Capital Markets & Trading