For many affordable housing lenders, 2009 will be
remembered as a year not worth remembering.
The continued erosion of the low-income housing tax
credit (LIHTC) market cut deeply into debt origination
volumes, and many lenders posted their worst numbers in
years. In short, a falling tide sinks all boats.
The Top 10 Affordable Housing Lenders of 2009(in
1. Bank of America Merrill Lynch
2. New York City Housing Dev. Corp.
3. Chase Community Development
4. Citi Community Capital
5. U.S. Bank
6. Prudential Mortgage Capital Co.
7. Community Preservation Corp.
8. Capital One Bank
9. Oak Grove Capital
10. New York State HFA
One bright spot came in the form of refinancing
opportunities for expiring tax-credit or Section 8 deals,
but those volumes often weren’t enough to offset
the precipitous decline in new construction business.
While the volume of 4 percent transactions fell off the
table, a flurry of 9 percent deals using the Tax Credit
Assistance Program (TCAP) and exchange program began
filtering in to lenders in the fourth quarter, which
brought hope that 2010 would be a little better than
But TCAP and exchange deals come with their own
challenges, and lenders generally find those deals much
harder to underwrite and close. The absence of a syndicator
and investor in exchange deals causes lenders to require
much higher reserves, or to underwrite them much as they
would a conventional market rate deal, with lower leverage
levels and higher debt service coverage ratios.
Still, many lenders are hopeful that the federal
programs will help spur more production this year. Less
than 10 percent of Chase’s 2009 debt volume was
for exchange deals, but the company ended 2009 with a much
stronger pipeline than it had seen in years.
“A lot of deals are now getting closed because
of those programs, so we’re optimistic about this
year in terms of playing some catch up,” says
Martin Cox, a Dallas-based executive who leads the
Community Development Banking business at Chase.
“We’re anticipating and budgeting a
return to 2008 levels, so that would be a meaningful
increase over what we closed in 2009.”
Bank of America tops this year’s list,
catapulting over Citi Community Capital for the first time
in our third annual rankings. Bank of America maintained a
steady volume for the last three years, originating over
$1.5 billion in affordable housing debt. Much of that came
in construction financing, though the lender also continues
to offer its direct placement tax-exempt bond business,
unlike many large institutions.
“We’ve stayed so steady the last two
years because of our ability to execute,” says
Maria Barry, who runs the Community Development Banking
division for the Charlotte, N.C.-based Bank of America.
“People came to us because they knew when they
received a commitment letter from us, that we would keep
our terms deliver.”
That consistency is a true commodity in today’s
market. On one hand, it’s hard to fathom that Bank
of America had such a good year where so many other large
institutions saw declines. But the bank may have the
largest CRA footprint of them all, with more offices, total
deposits and assets than the field, by a wide margin.
There are some notable absences on this year’s
list, for good reason. Former heavyweights Wachovia,
Washington Mutual, MMA Financial, and Corus Bank no longer
exist. Wells Fargo, which now owns Wachovia, declined to
participate in the survey.
Chase’s Community Development division was
bolstered through the company's acquisition of Washington
Mutual in the fall of 2008. In the past, the
company’s footprint only went as far West as
Arizona, but the acquisition expanded Chase’s
reach into the West Coast.
The acquisition also brought a Fannie Mae license with
it, which Chase has not yet re-activated, though it is
considering doing so for market-rate deals. And unlike
Chase, which focuses on construction loans, Washington
Mutual was also a very active permanent loan provider for
affordable housing projects. “It’s caused
us to take a second look at whether we would ever want to
get into the permanent loan business ourselves, and
we’re still evaluating that,” Cox
Oak Grove Capital, which purchased MMA
Financial’s agency debt group at the beginning of
2009, makes its first appearance on the list.
Most lenders are budgeting flat or modest gains this
year. Much depends on how the TCAP and exchange programs
play out, and whether the equity market can find a
But there are several wildcards in the mix that could
dash all hopes. A climbing benchmark 10-year Treasury or
LIBOR rate could conspire to further roil the market. And
then there’s the little matter of the GSEs.
“The pink elephant in the middle of the room is
what happens with Fannie and Freddie,” says Byron
Steenerson, president of Alliant Capital.
“Whatever form they finally take probably has the
most dramatic affect on housing as anything we could talk
Another source of concern for many lenders is the affect
that the recession has had on state and local finances. In
early 2009, California’s Pooled Money Investment
Board, which provides loans to bond-funded projects, voted
to defer all bond expenditures indefinitely. The cap was
eventually lifted, but not before scuttling many deals
ready to break ground.
“State subsidies and financing for affordable
housing projects are very important gap fillers for many
projects,” Cox says. “If state and local
governments run into deeper fiscal trouble and start
reducing their budgets for their affordable housing
programs, that's almost as big or a bigger problem as what
we have in the tax credit market
Editor's Note: For an expanded
version of this article, which includes the complete
ranking of the Top 25 Affordable Housing Lenders of 2009,
see the March issue of Affordable Housing Finance.