The affordable housing debt industry posted another strong year in 2011, as historically low interest rates drove refinancing and acquisition opportunities, and the New Issue Bond Program (NIBP) resuscitated the 4 percent market.

For owners, developers, and lenders alike, there was a lot to cheer about in 2011. Low-income housing tax credit (LIHTC) prices rebounded in a big way, climbing up in a year when both LIBOR and the 10-year Treasury were dropping down to rock-bottom lows.

“It was a very good year: Historically low rates, improvements in tax credit equity pricing, and the NIBP were all huge factors,” said Tim Leonhard, managing director of affordable housing debt at Oak Grove Capital. “And there were many firms who haven’t purchased affordable multifamily assets in years that came back to the market last year.”

Oak Grove more than doubled its affordable housing volume last year, a surge led by the two-dozen NIBP deals the company originated. And like many agency lenders, the company continued to see a strong market for preservation loans—a wave of expiring Year 15 deals captured some of the lowest interest rates in history.

But it wasn’t just permanent lenders that processed deals hand over fist last year. Construction lending also surged as many national, regional and local banks grew healthier and reengaged the market in earnest.

“We never stopped lending throughout the economic downturn, but a fair number of our competitors did,” said Kyle Hansen, executive vice president of U.S. Bank. “Over the last year, we saw a number of competitors return to the market, and competition increased considerably, especially in the larger cities and coastal Community Reinvestment Act (CRA) markets.”

The rankings

Wells Fargo had a very strong year, jumping two spots in this year’s ranking to come a close second, followed by Bank of America in third. But Citi Community Capital continued its reign atop the pack in Affordable Housing Finance’s sixth annual Top Lenders rankings.

Citi has claimed the top spot in five of the last six years, with 2009 being the lone exception. The mega-bank registered nearly half of its $2.1 billion volume in construction lending last year, while growing its bond credit-enhancement business from $647.5 million to $940 million.

“It was a very good year for us,” said Steven Fayne, Citi’s managing director. “We worked hard in the New York metro and did a tremendous amount of business in California again.”

While Citi saw its usual steady volume in the major coastal markets, the company targeted the mid-Atlantic area as a priority in 2011. “We put a big emphasis on that region, especially around the D.C. metro area,” said Fayne. “We started and ended the year with very good production in that area.”

The winner of this year’s “most improved” award goes to CWCapital, which catapulted 15 spaces up the rankings to No. 10.

The jump reflects CWCapital’s increasing commitment to the affordable housing industry. Last year, the lender started an affordable housing platform and launched a LIHTC syndication business, hiring Andrew Weil and Justin Ginsberg from Centerline Capital Group to run the program, which offers all three agency executions.

Last year was the continuation of a comeback for the affordable housing debt industry, and 2012 has all the makings of a banner year. In the affordable housing world, all roads lead back to the LIHTC market, and as yields continue to shrink in the nation’s strongest metros, financiers are finding better opportunities off the beaten path.

“Equity prices seem to have stabilized in the very high-demand CRA markets, and now secondary and tertiary markets are benefiting from the fact that yield-driven investors are telling syndicators to find deals somewhere else,” said Ed Sigler, head of community development real estate at JPMorgan Chase. “For awhile, there was a big distinction in price between one market to another, and that’s starting to narrow.”

NOTE: For the full Top 25 Lenders list and feature article, see the upcoming March issue of Affordable Housing Finance.

The Top 10 Affordable Housing Lenders of 2011
($ in millions)
($ in millions)
1. Citi Community Capital $2,169.6 $2,940.8
2. Wells Fargo & Co. 1,995 1,238.461
3. Bank of America Merrill Lynch 1,600 1,700
4. New York City Housing Development Corp. 1,508.3 1,387.6
5. JP Morgan Chase Bank 1,190 1,066.7
6. U.S. Bank 725 690
7. Oak Grove Capital 675 305
8. RBC Capital Markets 469.24 680.1
9. Capital One Bank 435.2 359.9
10. CWCapital 337 128