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.