July 24, 2001

It's An "All You Can Eat Buffet" for Apartment Owners Seeking Financing

At the end of the second quarter of 2001, both FannieMae and FreddieMac were well on their way to exceeding the new production budgets established earlier in the year. In fact, in some regions these annual budgets have already been exceeded. This is an incredible achievement given that the total budget for both entities in 2001 exceeds $20 billion in total funding! However, the ultimate beneficiaries of this massive volume of commercial mortgages are the owners of multifamily properties.

2001 has been characterized by historically favorable rates for commercial mortgages. Rates for 75% - 80% LTV commercial mortgage deals have ranged from a very attractive 6.75% to 7.25% for most of the year. Currently, prevailing rates for commercial mortgages on the FannieMae DUS product line have fallen below 7.0% for the second time this year. By historical standards, commercial mortgage rates such as these are exceptional opportunities for existing owners who wish to refinance or for purchasers who are seeking competitive acquisition loans or commercial mortgages.

FreddieMac continues to aggressively seek newer, recently completed projects and lower commercial mortgage LTV transactions. Spreads as low as 185 basis points over the 10-year Treasury have been structured for 20-year term deals that rate below 65% LTV. FreddieMac features a variety of creative deal making structures that can be tailored to individual commercial mortgages, both large and small.

With the recent reductions in short-term rates for commercial mortgages, both investors have re-focused their efforts in providing attractive variable rate transactions. These are designed to allow the current benefits of a variable rate floater over LIBOR and a subsequent conversion to a fixed rate. Related to commercial mortgages, current spreads for variable rate loans range from 185 to 200 over the 3-month LIBOR with all-in rates between 5.60% and 5.75%.

Both offer a value-based pricing matrix, which allows more conservatively structured loans and commercial mortgages to receive more aggressive pricing and terms. Additionally, we can provide supplemental loans to increase leverage during the term of the original commercial mortgage. Typically, these loans can be funded 24 months after the initial funding. Other programs and commercial mortgages include forward commitments for new construction and credit enhancement for tax-exempt bond transactions.

The consensus at American Property Financing (APF) is that favorable commercial mortgage lending conditions will prevail for the remainder of the year and, with a corporate production goal of $1.5 billion, we remain committed to providing commercial mortgage capital under these programs.

APF funds multifamily loans, portfolios, and tax-exempt credit enhancements from $3 to $150 million nationally under the programs offered by the FannieMae DUS program and FreddieMac's "Program Plus". We use correspondents like Steelhead Capital to originate business for us and to ensure the borrowers' needs are addressed throughout the entire transaction. On behalf of both Steelhead Capital and APF, we look forward to working with you on your upcoming commercial mortgages and financing requirements

American Property Financing West LLC is a wholly owned subsidiary of the American Property Financing Inc. APF is a "top 5" volume producer for the FannieMae DUS program, a FreddieMac "Program Plus" lender and an approved MAP lender for FHA/HUD multifamily properties. APF lends nationwide on a wide variety of market rate and affordable rental properties.

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With an extensive lender and commercial mortgages network, Steelhead Capital has built its reputation on structuring commercial mortgages and commercial real estate loans requiring both debt and equity placement. Fluctuations in the capital commercial mortgages present significant challenges for investors and we are pleased to provide financing, as well as, guide and advise its clients through the process of obtaining commercial mortgages. Whether you are looking for apartment financing, commercial financing, commercial mortgages, or creative "out of the box" real estate loan alternatives, we can help.

Our success is measured by our clients' success, and our mission is to be your source for the most appropriate - and advantageous - commercial mortgage solution that helps you achieve your goals. Make Steelhead Capital a part of your commercial mortgage and real estate financing success. We look forward to hearing from you soon regarding our commercial mortgages and real estate financing services.

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