The expanding financial crisis hitting global markets as a result of domestic housing continues to torpedo the income-property mortgage market. Lenders and borrowers alike are frantically seeking answers to questions about where markets are heading including pricing, values and acceptable leverage levels.
Starting more than a year ago, dramatic repricing of mortgage markets still leads to a downward spiral of property values of which the full impact is yet to be felt. Lenders and buyers alike are trying to understand new pricing realities based on more conservative mortgage underwriting. Furthermore, given today’s unpredictable markets, lenders seldom rely upon any current sales transactions for appraisal purposes. Most properties sold prior to the mortgage market meltdown are based on metrics using more favorable mortgage terms and leverage not available now.
Affordable Housing Expert Widens Institute’s Research Capabilities
Lenders are more selective than ever with current underwriting techniques reflecting very conservative parameters. And in particular, higher leverage fundings based on project values of the last couple of years are shunned. Instead, most lenders prefer internal valuation/underwriting models rather than simply applying debt service coverage and leverage restrictions to externally-generated valuations (e.g., purchase contracts and third-party appraisals).
