convential rates are rising and hard money rates are falling ?

[Jay Hinrichs]

I think this is the first time in my 40 years I have seen this Phenom.. conventional rates on the rise and HML rates falling.

with all the private money / Hard money / secondary financing/ rates have been super compressed.. part of this on the west coast is lack of inventory and deal flow.. so to get deal flow HML are lowering rates.

and of course rates had to rise from historic lows on conventional.

anyone seen this set of circumstances before?

[Russell Brazil]

The race to the bottom on hard money rates has been a very interesting phenomena over the past several years.  Ive seen rates on hard money in my market drop from about 15% a decade ago to around 8% today.  Investors chasing yield where ever they can find it I guess.  I look at some of the hard money stuff I have friends originating, and Im just shocked that they are doing some pretty risky loans at 8%....but they are holding it for such a short time and selling it to local banks 2 weeks later.  

I think the guys doing arbitrage from the bank to consumer have a lot of risk if the market turns.

I would imagine if consumer rates continue to move up, we should have hard money rates rise too, but with some delay.  If the risk free rates end up not that far below the hard money rates, that hard money number is going to need to rise.