Multifamily Investment Sales Broker at Marcus & Millichap
P: 630.570.2246
Randolph Taylor
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Freddie Mac played a critical role for multifamily borrowers in 2020 during the COVID-19 pandemic and the subsequent economic downturn, financing roughly 803,000 rental units, with more than 95% of those units being affordable to households earning 120% or below the area median income. Freddie Mac Multifamily also set a record $82.5 billion in loan purchase and guarantee volume last year, surpassing the prior record of $78.4 billion in 2019.

“In a volatile year, Freddie Mac was a stabilizing force in the multifamily market,” said Debby Jenkins, executive vice president of Freddie Mac Multifamily. “The fact that we hit a record in the midst of a pandemic shows our commitment to be a consistent force of debt financing for multifamily operators in both good times and bad. Our network of Optigo lenders did not skip a beat, and the Freddie Mac team kept up with a demanding pace to ensure we fulfilled our mission. At the same time, we exceeded our mission-driven benchmarks, the vast majority of units we financed are affordable to low- and moderate-income households.”

The $82.5 billion in production last year combined with the $17.5 billion in volume for the fourth quarter of 2019 put the government-sponsored enterprise (GSE) right at the $100 billion cap mandated by the Federal Housing Finance Agency. Freddie Mac also surpassed its mission-driven requirement of 37.5%, with approximately 40% of volume meeting the definition. These mission-driven transactions benefited affordable housing, smaller multifamily properties, seniors housing, manufactured housing, and rural housing. A new $70 billion cap has been established for 2021 with a 50% mission-driven requirement with new and different criteria.

Freddie Mac served all corners of the multifamily market in 2020 through its offerings, including nearly $5.3 billion small-balance loans, a record $12 billion in Targeted Affordable Housing loans, and $3.7 billion in seniors housing loans, including senior-living apartments. The GSE also securitized a record $78 billion through its securitization offerings, such as K- and SB-Deals, transferring a majority of expected and stress credit risk to third-party investors. Freddie Mac also provided $500 million in low-income housing tax credit equity investments to support underserved communities.

“We are proud that our achievements in 2020 reflect the critical role we play in the multifamily market,” said Richard Martinez, senior vice president of production and sales at Freddie Mac Multifamily. “During a global pandemic, Freddie Mac continued to provide critical liquidity to the market and continued working to address the persistent affordability challenges facing countless renters. We quickly adapted to the environment around us, rolling out a forbearance plan for borrowers and protections for renters to help address the challenges presented by COVID-19.”


Multifamily Investment Sales Broker at Marcus & Millichap
P: 630.570.2246
Randolph Taylor

Rent debt improved slightly in September as the economy has continued to improve and add back jobs.

The lack of a new federal stimulus package has not had a negative impact on rent debt—back rent payments owed to landlords—since the CARES Act relief expired in July. Rent debt improves slightly in September, with 32% of renters owing back rent to landlords down from 34% in August, according to data from Apartment List. This improvement has occurred in step with economic recovery and the addition of lost jobs.

“Despite the expiration of federal stimulus provided through the CARES Act, the economy has gradually been adding back jobs, indicating that we’ve started down the path of what will likely be a drawn-out recovery,” Christopher Salviati, housing economist at Apartment List, tells GlobeSt.com. “With some Americans starting to get back to work, the rate of non-payment has not worsened. That said, the rate of missed payments remains elevated, and we find that even many of those who are able to pay their rent are making significant financial sacrifices to do so.”

While the share of rent debt among renters is improving, it is still high, with more than a third of renters owe back rent payments. “The fact that so many Americans are struggling to pay their rent is putting downward pressure on rent prices,” says Salviati. “We find that among those who say the pandemic has made them more likely to move during 2020, the most commonly cited reason is the need to find more affordable housing. Many of these renters are likely moving back in with family or friends to relieve financial pressures. High-priced markets and luxury units, in particular, are seeing a drop off in demand lead to stagnating or falling rent growth.”

Eviction moratoriums have played a role in increasing missed payments—while also decreasing the number of evictions. These protections have expired in some areas, but in others—including the state of California—eviction moratoriums have been extended through the end of the year. “Eviction moratoriums have been an important tool in maintaining housing security for those that are struggling during these unprecedented times,” says Salviati. “We haven’t seen evidence that these protections are leading to higher rates of missed payments—renters who are able to afford their rent are continuing to make payments, and in fact, many are going to great lengths to stay current on their rent in spite of the protections in place. Rent debt is likely to be an issue through the end of the year with or without the presence of eviction moratoriums.”

Rent debt isn’t only a burden for renters—who are struggling to make payments and stay in their homes during a public health crisis—but it also places a burden on landlords. Many landlords are not able to maintain ownership with decreased cash flow. “Many landlords operate on relatively thin margins and rely on complete and timely rent payments in order to pay the mortgages on their rental properties. Widespread issues with rent non-payment will certainly impact landlords as well,” says Salviati. “That said, many lenders are offering options for mortgage forbearance, which may relieve some of this pressure.
Source: GlobeSt By Kelsi Maree Borland | September 25, 2020 at 02:00 PM
Multifamily Investment Sales Broker at Marcus & Millichap
P: 630.570.2246
Randolph Taylor

 

Nearly half of multifamily mortgage debt outstanding is backed by the federal government and, thus, stands to benefit from the CARES Act and recent actions from the Federal Reserve.

 

In an effort to ease the burden caused by COVID-19 to both apartment renters and owners,  the CARES Act offers loan forbearance on federally backed mortgages to multifamily owners who suspend evictions for their tenants.

In its own response to the coronavirus pandemic,  the Federal Reserve has committed to purchasing agency commercial mortgage-backed securities, as part of a larger $200 billion mortgage-backed securities (MBS) allocation.

Given these federal actions, it is important to remember just how much multifamily mortgage debt is held by Fannie Mae, Freddie Mac, and other government agencies.

According to Federal Reserve data, Fannie Mae and Freddie Mac accounted for 39% ($619 billion) of the nation’s $1.6 trillion in total multifamily mortgage debt outstanding in the fourth quarter of 2019, the highest share on record. Ginnie Mae, meanwhile, held an additional 8%.

This means that nearly half (47%) of all multifamily mortgage debt outstanding is backed by the federal government and, thus, qualifies for the loan forbearance conditions detailed under the CARES Act.

For some perspective, this is a higher share than during the Great Recession. For example, in 2009, Fannie, Freddie, and Ginnie held a combined 36% of the total multifamily mortgage debt outstanding. A decade earlier, in 1999, they held just over one-fifth (21%).

The National Multifamily Housing Council (NMHC) views these federal legislative and regulatory actions as critical in supporting the multifamily mortgage market. While  NMHC Rent Payment Tracker information to date indicates that the vast majority of apartment households continue to meet their rent obligations, should the stresses of the COVID-19 crisis significantly affect apartment residents’ financial health going forward, it may, in turn, hinder apartment owners’ abilities to meet their mortgage debt obligations.

 

Source: Multifamily Executive Chris Bruen Posted on April 21, 2020 

Multifamily Investment Sales Broker at Marcus & Millichap
P: 630.570.2246
Randolph Taylor

 

Big Gains Cause Concern

 

While rallies in oil and metals—from aluminum to nickel—faltered during the week, big gains have spurred increased speculation that inflation will pick up. Speculation over inflation has caused the 10-year Treasury yield to increase from 2.83% at the start of the week to 2.91%; the first time the 10-year yield has surpassed 2.90% since February. Investors are now nervous, wondering what happens if crude takes off and wages go higher, housing costs escalate, etc., and what will that mean for the overall economy? Continue reading “Big Gains Cause Concern”