Life Company Lenders Look For Deals

SAN DIEGO–Last year was good for life insurance company lenders, but it wasn’t always easy to meet goals, lenders said.

“We met our volume target, but it’s sometimes difficult to find deals that fit in our sandbox,” said Genworth Financial Managing Director and Head of Commercial Real Estate Carol Chen here at the Mortgage Bankers Association’s Commercial Real Estate Finance/Multifamily Housing Convention & Expo. “We had to turn over a lot of stones to find the deals. So, it was a good year, but it was hard to get there.”

CREFPanelColin Elder, Senior Vice President with Symetra Life Insurance Co., West Des Moines, Iowa, said two trends defined 2017. “Politically, whenever the Administration started getting some traction, interest rates would change, which kind of whipsawed the borrowers and the market,” he said. “So you saw volume come in fits and starts. We got to our number, but some weeks we signed up 15 deals, other weeks just two or three. That reflected the larger political and global economic landscape.”

Elder also observed a rush of business at the end of the year. “And those borrowers are probably patting themselves on the back right now, given what’s happened with interest rates,” he said.

Paul Hanson, Managing Director with Northwestern Mutual, Milwaukee, said his firm saw considerable opportunity in construction lending and permanent financing in 2017. “We also saw borrowers looking for longer-term financing last year,” he said. “Now, they look smart. Overall, it was a very competitive year for us. I was surprised how competitive the industry got late last year.”

Protective Life Insurance Co. Senior Vice President of Investments Rob Bedwell said 2017 felt like “a bit of a grind” at times. “We got our production figure out, but it felt like we were grinding a bit,” he said. “It wasn’t overly hard but it wasn’t easy. Borrowers kept thinking rates would go down or else they would call in a panic wanting to lock in right away, thinking that rates were going to go up the next week.”

Looking ahead, Hanson said Northwestern Mutual will likely lend the same amount on commercial real estate this year that it did last year. “We still see windows open for good construction and permanent loans, especially on apartments and well-leased commercial properties,” he said.

Chen said Genworth Financial plans a much bigger volume target in 2018 than last year. “We’re somewhat underweight in real estate loans versus our overall book,” she said. “So there is a big push to narrow that gap. We’re adding more team members and looking at our existing platform to scale it. We will look at how to differentiate ourselves to add volume.”

If a mortgage banking firm wants to access life insurance company capital, it needs to do several things, Elder said. “If you want to become a correspondent, you must be a firm that has not just originations but other aspects including people dedicated to closing and servicing. This is a long-term relationship with the borrower, so we want the mortgage banker to be involved through the life of the deal, so we require you to have professional, capable servicing folks.”

Then, do some deals through an existing life company correspondent, Elder said. “That can be a hurdle, but it’s probably the best way to do it if you’re in a market where we already have coverage,” he said. “If you’re in a market where we don’t have much coverage, make a pitch to us and we’ll have a conversation.”

Bedwell said Protective Life does not have exclusive relationships with correspondents. “We are open shop,” he noted, meaning it will accept deals from non-correspondent lenders. “This is still a relationship business,” he said. “There is a trust factor. The more you know someone the more trust, the more effective you can be.”