Over the past year, I’ve highlighted that lowering the federal funds rate won’t necessarily lead to a drop in mortgage rates. With the Fed rate lower, we’re seeing daily headlines asking: “Why aren’t mortgage rates following?”

We are excited to introduce our enhanced portfolio of direct commercial loan products. From small to large balance transactions and bridge financing to permanent loans, Fidelity Bancorp Funding now offers a direct product for all of your commercial lending needs. Please explore our competitive and flexible financing options and we look forward to being your one-stop direct lending solution.

With Proposition 33 on the November 2024 ballot, property owners and investors could face a significant shift in the rental housing market. The potential repeal of the Costa-Hawkins Rental Housing Act, a law that has protected certain properties from rent control for decades, poses substantial risks. While rent control may appear to address rising housing costs, it creates unintended consequences for both renters and real estate investors.

As California prepares to vote, it is crucial for renters and property owners alike to understand the far-reaching impacts of rent control and to consider steps to safeguard their interests.

As we move through another month, we’re excited to bring you timely updates, expert insights, and the latest loan rates to support your financial decisions. Take a look inside to see our popular articles and recent funding highlights!

According to David Frosh, CEO of Fidelity Bancorp Funding, the early stages of new initiatives are often the most challenging.

“From solar panels to sustainable real estate, these programs frequently struggle with profitability—if they ever reach it,” Frosh said.

You're invited to a special webinar featuring Peter Kaufman, author of, "Poor Charlie’s Almanac: The Wit and Wisdom of Charles T. Munger". A legendary businessman and the longtime CEO of Glenair, Peter will share his insights on the timeless bestseller about his close friend, the late Charlie Munger.

David Frosh, CEO of Fidelity Bancorp Funding, said coastal markets have very low cap rates and transaction volume is still very low.

“Cap rates are up almost everywhere, but the two primary data points are distressed deals and really good deals,” Frosh said, adding that the data set is obviously accurate but not helpful because of limited and unique data.

“In healthy markets, cap rates should be 150 to 250 basis points over interest rates. The real question is what happens to mortgage rates once the Fed starts dropping rates. Will mortgage rates follow? It is not certain.”

Watch the complete webinar as John Burns, the founder of John Burns Research and Consulting, Mark McLaughlin, President of Compass Real Estate, and David Frosh, CEO and Managing Partner of Fidelity Bancorp Funding, discuss the most important insights and trends facing real estate including:

• Housing Market Trends

• Affordability & Inventory

• Interest Rates & Mortgage Trends

• Demographic Trends

• Job Growth Impact

• Multi-family Housing Market

• Market Observations & Insights

In some cities, the surge in building has meant there are more apartments than can be quickly leased without cutting rents, making some investors skittish about adding more units. 

But banks have other issues that keep them from lending as much to apartment builders this year. Many regional banks are souring on the commercial real-estate loans already on their books. 

“Their current portfolios are getting marked down and they don’t have that much to lend,” said David Frosh, chief executive of Fidelity Bancorp Funding, a California real-estate lender.

That means developers need to raise more cash from investors to build. But many investors are more cautious today, as rent growth flattens and new projects look less profitable at today’s higher interest rates and construction costs. 

“The numbers don’t add up,” Frosh said.

What makes Fidelity Bancorp Funding better is simple: we lend from our own balance sheet which provides complete discretion on funding decisions. With Fidelity, what we offer is always what you get. While we will always be competitive with rate and term, if we say “yes” to a deal, we will fund.

Join us for our next live webinar featuring John Burns, the founder of John Burns Research and Consulting. With a career dedicated to helping housing executives make informed decisions, John's expertise understanding current and future trends tied to housing demand, supply, affordability, and design is not to be missed. The highly regarded advisor, thought leader, and speaker has over 740,000 LinkedIn followers with 23,000 subscribing to his free weekly emails. This webinar will focus on:

• A first look into the findings shared in John's upcoming best-selling demographics book, Big Shifts Ahead: Demographic Clarity for Businesses.

• Providing insights into upcoming housing market trends including what to expect from demand, supply, and affordability.

This event is not to be missed so register now and we look forward to seeing you there!

Earlier this month, Rithm completed a $500mm rated securitization of RTL Loans, the second such rated securitization since Toorak completed the first rated RTL securitization earlier in Q1. RTL loans refer to “fix and flip” loans, typically of short <18 month duration which are utilized to acquire and improve a (typically SFR) property, often with high leverage levels 80%+.

Getting a rating from an agency means that the asset class opens up to a new class of institutional fixed-income investors via these securitized products. This kind of positive development indicates a maturing industry with continued investor appetite, despite decreased volume of overall activity in the market from post-pandemic peaks.

David Frosh, CEO of Fidelity Bancorp Funding, tells GlobeSt.com that he believes the $1 trillion in maturing loans this year will be refinanced or sold at cap rates 100bps to 200bps above interest rates.

“New loans or sales will not pencil unless cap rates are higher,” Frosh said.

Fidelity Bancorp Funding, Inc., a leading financial institution specializing in commercial real estate, multifamily, single-family residential bridge loans, and permanent financing, is pleased to announce that Dillon Freeman has been named Senior Loan Officer focused on the San Diego Region.

Prior to Fidelity Bancorp Funding, Dillon worked a combined seven years at Pacific Premier Bank and then Axos Bank. He served in various roles covering origination, credit, portfolio management, special assets, and relationship management.

Dillon’s deep lending experience combined with being both a CFA and licensed Broker set him apart from the rest in his ability to get loans done and provide excellent customer service.

Dillon was a wrestler at Briar Cliff University where he achieved all-conference honors as a team captain and qualified for the NAIA National Wrestling Tournament as a freshman. He obtained his BS in Management Science from UC San Diego. Dillon lives in San Diego with his wife and one-year-old son Walter.

By David Frosh, CEO of Fidelity Bancorp Funding

nvestors in commercial real estate and multifamily housing should be less concerned about the Federal Funds rate and more focused on the potential scarcity of capital in the debt markets going forward.

Given the consistent 40-year drop-in mortgage interest rates from 18 percent in 1981 to under 3% in 2021, I think we’ve all forgotten the many potential drivers of these rates. For all the deserved attention on the Federal Funds rate, it seems that many have overlooked an important principle: the Federal Funds rate does not directly impact mortgage rates. Instead, its influence is felt heavily in Treasury bonds, usually 10-year Treasuries, which have historically been a significant determinant of mortgage rates. But not the only one. Factors like GDP, unemployment, housing demand, and inflation also weigh heavily on mortgage rates and often without a direct relationship to the Fed Fund rate or Treasury Bond yields.

Others in the CRE community, however, disagree with CBRE’s prognosis. The CRE capital markets have many well known issues that will make borrowing difficult in the year ahead, these experts say.

“The lending market is far from stable,” David Frosh, CEO of Fidelity Bancorp Funding, tells GlobeSt.com even though interest rates have stabilized. “The 3% to 4% loans coming due total more than $1 trillion. New financing will most likely be in the high 5% to mid-6% range and loan-to-values (LTV) will be lower.

“These loans are upside down and it is going to create a huge problem for banks and investors.”