Rockport Mortgage’s John Dromey Talks FHA Lending Through COVID
The COVID-19 pandemic has accelerated many real estate trends and also placed increased importance on certain subsectors of the industry, one being affordable housing. Rockport Mortgage is a leading provider of Federal Housing Administration (FHA) loans, financing affordable and market rate housing, as well as health care and assisted living facilities.
Last year turned out to be the firm’s busiest ever. Its closings included a $140 million loan for Parkview Towers, a 688-unit affordable housing property located in West New York, N.J., in October. As part of the refinance, borrower LIHC Investment Group extended the project’s affordability through 2059.
In addition to its origination activities, over the years, Rockport has supported many nonprofit organizations, especially those with a focus on affordable housing, social justice and disadvantaged youth.
Commercial Observer chatted with John Dromey, a senior vice president at Rockport, to learn more about his lending experience over the past year.
Commercial Observer: Where did you grow up, and how did you get into real estate?
John Dromey: I grew up in western Massachusetts. How I got into real estate is kind of interesting, as I was actually a teacher in my past life. I got a degree in business and a degree in history, and then I got my certification to teach history, and a master’s degree in education. I tried teaching for a few years, but that kind of dried up in the early ‘90s as it was difficult to get a teaching job back then. I had a buddy who had a real estate appraisal company, I went to work for him, and that’s how I started in real estate.
How was the switch from teaching to appraisal work?
It wasn’t difficult because teaching is a really tough job, and after a couple of years doing it, I was thinking to myself that I had made the wrong decision [laughs].
What was your path to Rockport Mortgage?
I was in the real estate appraisal business for a few years. My company actually closed down, but I was able to get a job with the Department of Housing and Urban Development [HUD]. I worked there for 10 years, and that’s where I met Dan Lyons, who’s now the owner and president of Rockport. Dan had worked at HUD also; he left in the mid-1990s, but we remained friends and eventually he brought me over to Rockport. I was an appraiser at HUD, and that experience was able to translate into becoming an underwriter at Rockport Mortgage. When I joined in 2004, there were only five or six people here. We’ve grown to a team of about 35 now. It’s been a great 17 years.
How has your experience been lending during this crisis?
During the last crisis, we did slow down a bit with work. But, boy, this pandemic just exacerbated the need for affordable housing. We’ve been busier than ever. It’s actually been the busiest year we’ve ever had.
What’s the most common request you’re getting today from borrowers, in terms of their loan needs?
Everybody’s interested in FHA products. The 35-year term has been great, and interest rates have been great. Our borrowers are just anxious to get the deals done as fast as possible and lock in these super low rates.
What’s been the biggest challenge for you?
It’s interesting. Back when it started — in March, April, May — we were all kind of secluded, but we were very successful in keeping things going. Obviously, the technology was working well for us all, but I think the biggest challenge has been getting out to see these properties as travel is so restricted. We’re a national company, so we’re doing deals all over the country, and physically getting to these properties and trying to see vacant units, while also trying to be as safe as possible, has been tough. But we have to go out and visit them.
How have your borrowers fared during COVID?
Affordable housing has been super, super strong, so our borrowers have actually been doing fine. What’s important to note is the residents in affordable housing have no other place to go. You see a lot of the wealthier people in New York City going to summer homes or leaving the city, but the residents of affordable units have no option. So, the preservation of affordable housing is more important than ever, right now.
Have you worked with any new borrowers during COVID?
We have some new borrowers, certainly, but we have a core group of borrowers we’ve been working with since I started here. Dan Lyons has developed some really great relationships with borrowers. And I think that’s how it works: You develop a relationship, you show them you can get the project to succeed, close the loan, and they’re happy to stick with you. A lot of these borrowers have different partners in the deals, and they might have products or projects across the country. So, that’s how you get out to California or Oregon or Texas.
Rockport is one of the most active FHA multifamily lenders; how would you describe your typical lending profile?
We’ve always been strong with FHA [product]. Like I said, I worked at HUD, Dan Lyons worked at HUD, so we were able to translate very well into the FHA world with our backgrounds. And that’s one of the reasons we’re just very strong with the FHA product.
At the moment, we’re very busy with refinances, but also heavily involved in several new construction 221(d)(4)s [HUD-insured mortgage loans to facilitate the new construction or rehabilitation of multifamily rental or cooperative housing]. We do a lot of substantial rehabs. HUD has a product called a 241(a) supplemental loan, where you can add additional units to existing properties, and we’ve been pretty active in that space. We saw some projects get halted during construction, and they’re able to pick up now. So, we’ve been working with borrowers who may have started projects but were unable to complete them because of the pandemic. They’re now hoping to pick up the pieces and finish the deals.
You closed some large affordable deals last year, how was the closing experience?
We have a great group of attorneys in our company who have been doing a great job. One of the fun things about HUD closings was that everybody would travel to the closing tables, then go out to the closing dinners. That hasn’t been happening this year, so that’s too bad.
How’s your pipeline looking for 2021?
We’re going into 2021 very strong. I’m probably working on seven or eight projects that we’re getting close to submitting to HUD, and I’ve already got a couple in front of HUD as we speak, so I think 2021 is going to look great. I think affordable housing is going to remain very strong, although it’ll be interesting to see how the high-end market rate product is going to turn out.
I have a daughter who just graduated from college as a nurse. I’m trying to help her find an apartment and it’s amazing how pricing has still held up. I thought there might be a more significant dip in rents, but as there isn’t, she’s looking for me to help her out a little bit, I think.
That’s what dads are for, though, right?
Yes, that’s true [laughs].
How can we improve housing affordability today?
It really comes down to a partnership with cities and with the federal government. HUD and the Section 8 program has been very strong in maintaining affordable housing. Then there’s tax incentives — the tax credit program has been excellent in helping to provide for new affordable housing. There aren’t many new Section 8 [properties] coming out, but the preservation of the projects that currently have Section 8 is very important, and I like to think we’ve played a really active role in that preservation.