How new competition is reshaping the DSCR lending market
Charles Goodwin (pictured top), VP and head of bridge and DSCR lending at Kiavi, has watched that competition build. Kiavi has been operating in this space well before the larger lenders arrived.
“When you have a lot of competition coming in doing similar types of loans, it’s hard,” Goodwin told Mortgage Professional America. “But I think it’s a good natural evolution for this private lending space. A lot of people five and 10 years ago would have viewed this private lending space as a little Wild Westy, the old-school hard money lending that people think about. I just don’t think that is what it is. I think it’s matured a lot.”
How lenders compete now
Institutional capital has been flowing into DSCR, according to Goodwin, and that has increased competition among the lenders originating the loans. The effect shows up most clearly in pricing.
“As Treasury yields have run up 50, 75 basis points over the past six months, DSCR rates have not run up fully with it,” he said. “You’ve started to see DSCR rates catch up a little bit, meaning they’re increasing, but for a while, as Treasury yields were going up, you had DSCR rates holding more or less steady. It’s that spread compression as capital from the capital markets gets compressed, and then lender margin gets compressed. At the end of the day, it’s good for the end borrower.”
Pricing is only one way lenders can respond when competition rises. Goodwin said the pattern resembles any other credit cycle, with customer service and operational efficiency also becoming competitive factors.
