NEW YORK CITY—For James P. Flynn, newly promoted to the presidency of Hunt Mortgage, the expectation for the next few years is continued growth in loan production volume. Exactly where that growth will come from remains to be seen.
Flynn tells GlobeSt.com that with total originations of $2.5 billion in 2015, 80% of which came from agency loans, Hunt Mortgage is on pace to achieve $3 billion by the end of this year. “By 2019, we hope to have our originations closer to the $5-billion level,” he says. “We think the appropriate size for our organization is somewhere in that $5-billion to $7-billion number.”
In part, that growth scenario is driven by Hunt Mortgage's considerable business with loan products from Fannie Mae, Freddie Mac and the Federal Housing Administration. “Assuming the agencies only grow at a marginal basis, you have to take market share, and some of that will be driven by new products in the marketplace,” Flynn says. He will offer further insights into the state of the multifamily finance market at next month's RealShare Apartments conference, scheduled for Oct. 19 and 20 in Los Angeles.
For Hunt Mortgage, he says, “we have two growth strategies. We believe the agency growth is significantly dependent on continuing to be able to attract and retain talent. To be able to do that, we need to be able to provide a variety of products for clients. We continue to expand our floating-rate business on the commercial side for both the transitional multifamily side but also transitional on the non-multifamily side. That includes retail, office, self-storage and mixed-use.”
On the fixed-rate side, Flynn says, “we're having ongoing discussions with multiple partners about placing products with them directly. We believe in our underwriting and our credit, and in most cases we would like to retain some risk, whether that's in the form of a guarantee or in the form of a residual in a securitization or a subordinate interest in a joint venture. That's kind of our calling card and what we're trying to sell ourselves as.”
He notes that small-balance originations, particularly on the Freddie Mac side, “picked up significantly last year and this year we expect to do up to $600 million in that business. We've made significant hires in our affordable housing group over the past six months or so; the pipeline has grown from virtually dormant to almost $600 million today. The expectation is that the small balance and affordable sides of the business will continue to grow than the conventional side of the business, primarily because of their size. The conventional side of the business is the largest and that market is not growing quite as quickly as the others.”
Hunt Mortgage is a participant in the CMBS market, and in common with other lenders involved with securitization, “we had a tough start to the year, with rates dropping, spreads widening, the issuance cost going up—it really wreaked some havoc in the market,” Flynn says. “There was real uncertainty around pricing and continual re-trading going on at the closing table. We did not want to engage in that with our clients.”
Added to which, he says, “given the number of participants that have entered the conduit space in particular, the profit margins in that business were already being squeezed before you added in the market volatility, and layer on top of that the impending risk retention rules that everyone saw coming down the pipeline for the end of December.” Going forward, while Flynn believes that “the market will solve the risk retention problem,” there's a question about whether smaller issuers such as Hunt Mortgage can participate meaningfully in the CMBS space.
He cites two considerations. “One is the various risk retention rules and new representations that issuers are required to make, and the second is the ongoing perception that the credit quality from smaller lenders is lower than the credit quality from banks and issuers. I don't necessarily subscribe to that belief, but nonetheless it's out there and bond buyers drive that market.”
If CMBS may be getting less emphasis at Hunt Mortgage in the near term, new product development represents a focal point. “Certainty of execution is important for borrowers, and that's why we're consistently working with several partners to develop products that will provide that certainty to borrowers,” Flynn says. “And I think there will be a market for some of those on a permanent basis.”
More than 300 of the industry's leading national investors, REITs, banks, private equity firms, asset management firms and other institutions will join us as we explore the market conditions behind the trends at this year's RealShare National Investment & Finance, scheduled for Oct. 5 and 6 at the Roosevelt Hotel in New York City. Learn more.
Steady gains in the US economy have resulted in net positives for the multifamily sector—will this wave continue for the foreseeable future? What's driving development and capital flows? Join us at RealShare Apartments on October 19 & 20 for impactful information from the leaders in the National multifamily space. Learn more.
Flynn tells GlobeSt.com that with total originations of $2.5 billion in 2015, 80% of which came from agency loans, Hunt Mortgage is on pace to achieve $3 billion by the end of this year. “By 2019, we hope to have our originations closer to the $5-billion level,” he says. “We think the appropriate size for our organization is somewhere in that $5-billion to $7-billion number.”
In part, that growth scenario is driven by Hunt Mortgage's considerable business with loan products from
For Hunt Mortgage, he says, “we have two growth strategies. We believe the agency growth is significantly dependent on continuing to be able to attract and retain talent. To be able to do that, we need to be able to provide a variety of products for clients. We continue to expand our floating-rate business on the commercial side for both the transitional multifamily side but also transitional on the non-multifamily side. That includes retail, office, self-storage and mixed-use.”
On the fixed-rate side, Flynn says, “we're having ongoing discussions with multiple partners about placing products with them directly. We believe in our underwriting and our credit, and in most cases we would like to retain some risk, whether that's in the form of a guarantee or in the form of a residual in a securitization or a subordinate interest in a joint venture. That's kind of our calling card and what we're trying to sell ourselves as.”
He notes that small-balance originations, particularly on the
Hunt Mortgage is a participant in the CMBS market, and in common with other lenders involved with securitization, “we had a tough start to the year, with rates dropping, spreads widening, the issuance cost going up—it really wreaked some havoc in the market,” Flynn says. “There was real uncertainty around pricing and continual re-trading going on at the closing table. We did not want to engage in that with our clients.”
Added to which, he says, “given the number of participants that have entered the conduit space in particular, the profit margins in that business were already being squeezed before you added in the market volatility, and layer on top of that the impending risk retention rules that everyone saw coming down the pipeline for the end of December.” Going forward, while Flynn believes that “the market will solve the risk retention problem,” there's a question about whether smaller issuers such as Hunt Mortgage can participate meaningfully in the CMBS space.
He cites two considerations. “One is the various risk retention rules and new representations that issuers are required to make, and the second is the ongoing perception that the credit quality from smaller lenders is lower than the credit quality from banks and issuers. I don't necessarily subscribe to that belief, but nonetheless it's out there and bond buyers drive that market.”
If CMBS may be getting less emphasis at Hunt Mortgage in the near term, new product development represents a focal point. “Certainty of execution is important for borrowers, and that's why we're consistently working with several partners to develop products that will provide that certainty to borrowers,” Flynn says. “And I think there will be a market for some of those on a permanent basis.”
More than 300 of the industry's leading national investors, REITs, banks, private equity firms, asset management firms and other institutions will join us as we explore the market conditions behind the trends at this year's RealShare National Investment & Finance, scheduled for Oct. 5 and 6 at the Roosevelt Hotel in
Steady gains in the US economy have resulted in net positives for the multifamily sector—will this wave continue for the foreseeable future? What's driving development and capital flows? Join us at RealShare Apartments on October 19 & 20 for impactful information from the leaders in the National multifamily space. Learn more.
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