The delinquency rates of most types of commercial and multifamily mortgages fell in the third quarter, with multifamily loan delinquency rates back at prerecession levels, according to Mortgage Bankers Association (MBA) research.
The 30-day delinquency rate for commercial mortgage-backed securities (CMBS) loans was down 0.37 percentage points to 5.47%. The 60-day delinquency rate of commercial and multifamily loans held by life insurance companies fell 0.03 percentage points to 0.05%.
The 60-day delinquency rate for multifamily loans backed by Fannie Mae decreased to 0.09%, while the 60-day rate for Freddie Mac multifamily loans increased 0.01 percentage points to 0.03%.
The post-recession highs for Fannie Mae and Freddie Mac multifamily delinquency rates occurred around 2010. In the fourth quarter of 2010, the 60-plus day delinquency rate for Fannie Mae was 0.71%, and was 0.33% in the third quarter of 2011 for Freddie Mac.
In the fourth quarter of 2006, the Fannie Mae 60-day delinquency rate was 0.08%, and the Freddie Mac rate was 0.05%.
Some delinquency rates were still above recession-era peaks. Approximately 1.28% of loans held by the Federal Deposit Insurance Corp. and banks were delinquent 90 or more days in the third quarter. That delinquency rate peaked between 2010 and 2011 at above 4%, with the low at 0.8% around mid-2006.
CMBS 30-plus and real estate owned (REO) delinquency rates stood at just above 5% in the third quarter. The peak was in 2011 at close to 9%. Between 1997 and 2009, CMBS delinquencies were below 2%.
“Improving property fundamentals and values, as well as a strong finance market, are helping drive delinquency rates down across all investor groups,” said MBA Vice President of Commercial Real Estate Research Jamie Woodwell in a press release.
Showing posts with label Freddie Mac. Show all posts
Showing posts with label Freddie Mac. Show all posts
Wednesday, December 3, 2014
Tuesday, October 21, 2014
Federal Housing Finance Agency Unveils Plan to Loosen Rules on Mortgages
For years, politicians, housing advocates and potential home buyers have complained that tight credit policies after the housing market crash have kept too many deserving people from qualifying for mortgages.
Now the government is taking steps that it says it hopes will allow more first-time buyers and lower- and middle-income Americans to get home loans at low rates.
On Monday, Melvin L. Watt, the nation’s chief housing regulator, announced a program offering more reassurances to mortgage banks that fear they could suffer unpredictable losses on the loans they sell to the government.
Separately, he disclosed that efforts are underway to allow borrowers to receive government-backed loans with much smaller down payments than are now required. But contrary to early expectations, he offered few details on such plans.
“We know that access to credit remains tight for many borrowers, and we are also working to address this issue in a responsible and thoughtful manner,” said Mr. Watt, director of the Federal Housing Finance Agency, which regulates the mortgage finance giants Fannie Mae and Freddie Mac.
The move in large part is intended to reassure banks that have had to pay tens of billions of dollars to settle legal cases arising from the housing boom and bust and buy back bad loans sold to Fannie and Freddie. To avoid having to make those payments again, many lenders now demand that borrowers meet stricter requirements for loans, known in the industry as overlays.
“We know that this issue has contributed to lenders’ imposing credit overlays that drive up the cost of lending and also restrict lending to borrowers with less-than-perfect credit scores or with less conventional financial situations,” Mr. Watt said in a speech on Monday to the Mortgage Bankers Association convention in Las Vegas.
Some economists, with mortgage bankers, welcomed the new plan, saying that it, with more gains in the job market and a recent dip in mortgage rates, could put the housing recovery back on track. Ben S. Bernanke, the former chairman of the Federal Reserve, recently told an audience that even he could not get a loan to refinance his mortgage.
“Creditworthy borrowers who have been locked out of the housing market will finally have an opportunity to become homeowners,” said Mark Zandi, chief economist at Moody’s Analytics.
But some housing finance analysts contend that tight credit does not sufficiently explain the weakness in the housing market. Instead, they say, an aging population, stagnant wages and a wariness of taking on new debt have all reduced demand for mortgages.
“The reality is that this is as much a demand-driven drought as it is a credit-driven drought,” said Joshua Rosner, of Graham Fisher & Company, a research firm.
With the new plan, the government is trying to strike a balance between the frenzied years of the housing bubble, when mortgages were approved with little regard for the ability of borrowers to repay them, and the tight grip on mortgages after it burst.
“It requires a lot of fine-tuning to get a national mortgage market that achieves all the objectives we want,” said Stan Humphries, chief economist for Zillow, a real estate website.
To reassure mortgage lenders, the housing finance agency intends to further relax the agreements that determine when Fannie and Freddie may require banks to buy back bad loans. The terms that are being loosened involve loans that show evidence of fraud or other flaws in the underwriting process.
Under the new agreements, for instance, Fannie and Freddie would demand buybacks only when there was a pattern of misrepresentations and inaccuracies in the loans. In addition, if problems are later discovered in loans, the deficiencies would have to be significant enough to have made the loans ineligible for purchase by Fannie and Freddie in the first place.
These changes follow other recent adjustments by the housing finance agency to calm mortgage lenders. But mortgage banks did not increase lending to less creditworthy borrowers.
Now, some housing specialists are more hopeful that the overhaul announced on Monday will prompt the banks to lend more. “It will be helpful in moving the needle,” Jim Parrott, a senior fellow at the Urban Institute, said.
Mr. Watt said he would give specifics in a few weeks about a plan for borrowers that could include down payments of as little as 3 percent.
Borrowers can already apply for low down-payment loans that are backed by the Federal Housing Administration. But housing specialists said that some borrowers who qualified for loans backed by Fannie and Freddie were being directed to the F.H.A., which backs loans that have much higher interest rates.
“You want people to get the loan they qualify for,” said Michael D. Calhoun, president of the Center for Responsible Lending.
Now the government is taking steps that it says it hopes will allow more first-time buyers and lower- and middle-income Americans to get home loans at low rates.
On Monday, Melvin L. Watt, the nation’s chief housing regulator, announced a program offering more reassurances to mortgage banks that fear they could suffer unpredictable losses on the loans they sell to the government.
Separately, he disclosed that efforts are underway to allow borrowers to receive government-backed loans with much smaller down payments than are now required. But contrary to early expectations, he offered few details on such plans.
“We know that access to credit remains tight for many borrowers, and we are also working to address this issue in a responsible and thoughtful manner,” said Mr. Watt, director of the Federal Housing Finance Agency, which regulates the mortgage finance giants Fannie Mae and Freddie Mac.
The move in large part is intended to reassure banks that have had to pay tens of billions of dollars to settle legal cases arising from the housing boom and bust and buy back bad loans sold to Fannie and Freddie. To avoid having to make those payments again, many lenders now demand that borrowers meet stricter requirements for loans, known in the industry as overlays.
“We know that this issue has contributed to lenders’ imposing credit overlays that drive up the cost of lending and also restrict lending to borrowers with less-than-perfect credit scores or with less conventional financial situations,” Mr. Watt said in a speech on Monday to the Mortgage Bankers Association convention in Las Vegas.
Some economists, with mortgage bankers, welcomed the new plan, saying that it, with more gains in the job market and a recent dip in mortgage rates, could put the housing recovery back on track. Ben S. Bernanke, the former chairman of the Federal Reserve, recently told an audience that even he could not get a loan to refinance his mortgage.
“Creditworthy borrowers who have been locked out of the housing market will finally have an opportunity to become homeowners,” said Mark Zandi, chief economist at Moody’s Analytics.
But some housing finance analysts contend that tight credit does not sufficiently explain the weakness in the housing market. Instead, they say, an aging population, stagnant wages and a wariness of taking on new debt have all reduced demand for mortgages.
“The reality is that this is as much a demand-driven drought as it is a credit-driven drought,” said Joshua Rosner, of Graham Fisher & Company, a research firm.
With the new plan, the government is trying to strike a balance between the frenzied years of the housing bubble, when mortgages were approved with little regard for the ability of borrowers to repay them, and the tight grip on mortgages after it burst.
“It requires a lot of fine-tuning to get a national mortgage market that achieves all the objectives we want,” said Stan Humphries, chief economist for Zillow, a real estate website.
To reassure mortgage lenders, the housing finance agency intends to further relax the agreements that determine when Fannie and Freddie may require banks to buy back bad loans. The terms that are being loosened involve loans that show evidence of fraud or other flaws in the underwriting process.
Under the new agreements, for instance, Fannie and Freddie would demand buybacks only when there was a pattern of misrepresentations and inaccuracies in the loans. In addition, if problems are later discovered in loans, the deficiencies would have to be significant enough to have made the loans ineligible for purchase by Fannie and Freddie in the first place.
These changes follow other recent adjustments by the housing finance agency to calm mortgage lenders. But mortgage banks did not increase lending to less creditworthy borrowers.
Now, some housing specialists are more hopeful that the overhaul announced on Monday will prompt the banks to lend more. “It will be helpful in moving the needle,” Jim Parrott, a senior fellow at the Urban Institute, said.
Mr. Watt said he would give specifics in a few weeks about a plan for borrowers that could include down payments of as little as 3 percent.
Borrowers can already apply for low down-payment loans that are backed by the Federal Housing Administration. But housing specialists said that some borrowers who qualified for loans backed by Fannie and Freddie were being directed to the F.H.A., which backs loans that have much higher interest rates.
“You want people to get the loan they qualify for,” said Michael D. Calhoun, president of the Center for Responsible Lending.
Saturday, October 18, 2014
Freddie to Fund, Securitize Small Apt. Loans
Freddie Mac, which increasingly has relied on the securitization market to fund loans its lender partners originate, has launched a program to fund small-balance multifamily mortgages in much the same way.
So far, the housing-finance agency has approved Greystone Servicing Corp., Hunt Mortgage Group and Arbor Commercial Mortgage to write loans for the program. Its aim is to have its first $100 million securitization in the market by early next year. The agency also plans to add other lenders to the program in the coming months, with the hope of having five to seven lenders in the program by the end of the year. Next year, it plans to open the program up to its Program Plus lenders - those that regularly have been writing small-balance loans.
The overall structure of its small-balance securitizations will be similar to the agency’s existing K-series transactions, in that bonds will be structured according to risk and would include a first-loss, or B-piece. It’s not clear whether the most senior bonds will also be rated.
Each transaction will be secured by loans originated, and sold to Freddie, by a single lender. And that lender would be required to retain the B-piece, which would likely amount to more than 7.5 percent of the entire transaction.
As the program evolves, transactions backed by loans originated by multiple lenders might be floated. The agency is aiming to fund loans with balances of between $1 million and $5 million
against properties that have a minimum of five units each. Loans could be sized up to 80 percent of a collateral property’s value and would require debt-service coverage ratios of at least 1.25x, or 1.2x in the country’s strongest markets. It will offer fixed-rate balloon loans as well as hybrid adjustable-rate loans, which could have terms of up to 30 years and fixed rates for their initial five, seven or 10 years. After that, the loans’ coupons are reset every six months.
While Freddie’s small-balance loans, like its larger-balance offerings, are nonrecourse, save for specific carve-outs, the agency will require originators to collect borrower FICO scores. So a borrower’s credit history, in addition to a property’s performance, will play a role in a loan’s underwriting. That’s because most smallcap properties are held by individuals as opposed to bankruptcy-remote entities, like larger properties are. “We believe our initiative will increase liquidity in the small multifamily loan space and provide stability and facilitate private capital investments in this somewhat fragmented and underserved market segment,” said David Brickman, executive vice president of Freddie’s multifamily business.
The agency estimates that roughly half of the country’s apartment units are in what could be considered small-capitalization properties. And about one-third of the multifamily mortgage market is comprised of small-balance loans.
The small-cap apartment market is highly fragmented and generally has been served by local and regional banks, which often won’t write long-term loans. In addition, because of regulatory pressures, those bank lenders often can move out of certain markets, leaving property owners with few borrowing options.
“The opportunity is ripe” for Freddie to get into the small-balance market in a bigger way, according to Nashwa Moussa, director of conventional structured transactions, who oversees the agency’s small-balance lending initiative. “We’re bringing securitization to the space,” she explained. While other lenders have securitized small-balance loans, none has developed a systematic program to regularly bring deals to market.
Wednesday, October 8, 2014
Liquid Apartment Lending Market Sees Conduits Rising
Commercial mortgage-backed securities lenders are gaining market share in the apartment market as Fannie Mae, Freddie Mac and the life insurance companies have been less active than during the same time last year. "The agencies have become more active after starting the year slowly," said Faron Thompson, international director in JLL's capital markets group. "Borrowers have more choices than they've had since 2007. There are a number of different programs and a complete smorgasbord of opportunities."
There were about $706 million of new apartment loans in the first half of 2014 - about 2% less than during the same period in 2013. But Fannie Mae, Freddie Mac and the life insurance companies have seen their volumes drop about 13% year-over-year, according to a new report from JLL, citing data from the Mortgage Bankers Association. CMBS Lending volumes are about 19% higher.
Although Fannie Mae and Freddie Mac had a slow start to the year, this changed after Mel Watt to the reins of the Federal Housing Financing Agency in February. Watt succeeded Ed DeMarco, whose tenure was marketed by curtailing lending efforts with the aim of making Fannie Mae and Freddie Mac smaller and smarter. "[Watt] wanted Fannie Mae and Freddie Mac to make smart loans and well underwritten loans. He was not trying to put them in a volume box or keep them from responding to the market's needs," Thompson added.
Market participants have observed that in recent months, the GSEs have worked hard to be more competititve with the conduits. Dan Lisser, principal and senior managing director at Johnson Capital, observed that the GSEs became more aggressive when restrictions under DeMarco, such as reducing portfolios by 10% annually, were lifted. "For borrowers, [the liquidity] will continue to keep cap rates low as they can get attractive financing," Lisser said. "It will be very good for sellers as well, as they will see great pricing."
Peter Donovan, a senior managing director at CBRE, told REFI he is not surprised to see the increase in competition from the agencies. "I think they're doing it in a disciplined way," he said. "I dont like the word 'aggressive,' because I don't see it as a bad thing. This is not 2006 or 2007, where underwriting has seemed to go a little too far. It's always been fairly compeititive, but in a healthy way."
Thompson noted that earlier this year, CMBS pricing was almost in line with the GSEs. "But right now, agency pricing is anywhere from 15 to 35 basis points tighter. The gap has widened again," he added, noting that gSEs offer a product that is more customized that the so-called "cookie cutter" CMBS loans.
Ray Potter, founder of New York-based advisory company R3 Funding, illustrated. In March, the firm was working to arrange a loan on a portfolio of Class B apartments in Gates, NY, that was shopped to CMBS and GSE lenders. At that time, the CMBS lender was the aggressive. But three months later, the same borrower was looking for a loan on six similar properties in the same area. This time, a Freddie Mac lender offered termes that were much more aggressive, including a four-year interest-only period and a spread that was 20 bps tighter. "It was a pretty easy decision to go with the Freddie Mac lender - there was more IO, more proceeds and a tighter spread," he added.
There continues to be a divergence between the type of borrowers that CMBS lenders and GSEs are looking for. CMBS lenders tend to offer higher pricing and pursue smaller borrowers, Donovan noted. Both groups of lenders, however, are similar in terms of client base and execution. That means increased competition from Fannie Mae and Freddie Mac may affect borrowers in small ways, such as providng another year of interest-only or a particular structure that is more effective, he added.
On the syndicated lending side, the GSEs are about 20 basis points cheaper than the bank market right now. "But if you compare teh syndicated loan product to Fannie Mae and Freddie Mac, it's very different. The execution is more like a CMBS loan, whereas we are floating-rate, three- to five-year lender," Galligan said.
There were about $706 million of new apartment loans in the first half of 2014 - about 2% less than during the same period in 2013. But Fannie Mae, Freddie Mac and the life insurance companies have seen their volumes drop about 13% year-over-year, according to a new report from JLL, citing data from the Mortgage Bankers Association. CMBS Lending volumes are about 19% higher.
Although Fannie Mae and Freddie Mac had a slow start to the year, this changed after Mel Watt to the reins of the Federal Housing Financing Agency in February. Watt succeeded Ed DeMarco, whose tenure was marketed by curtailing lending efforts with the aim of making Fannie Mae and Freddie Mac smaller and smarter. "[Watt] wanted Fannie Mae and Freddie Mac to make smart loans and well underwritten loans. He was not trying to put them in a volume box or keep them from responding to the market's needs," Thompson added.
Market participants have observed that in recent months, the GSEs have worked hard to be more competititve with the conduits. Dan Lisser, principal and senior managing director at Johnson Capital, observed that the GSEs became more aggressive when restrictions under DeMarco, such as reducing portfolios by 10% annually, were lifted. "For borrowers, [the liquidity] will continue to keep cap rates low as they can get attractive financing," Lisser said. "It will be very good for sellers as well, as they will see great pricing."
Peter Donovan, a senior managing director at CBRE, told REFI he is not surprised to see the increase in competition from the agencies. "I think they're doing it in a disciplined way," he said. "I dont like the word 'aggressive,' because I don't see it as a bad thing. This is not 2006 or 2007, where underwriting has seemed to go a little too far. It's always been fairly compeititive, but in a healthy way."
Thompson noted that earlier this year, CMBS pricing was almost in line with the GSEs. "But right now, agency pricing is anywhere from 15 to 35 basis points tighter. The gap has widened again," he added, noting that gSEs offer a product that is more customized that the so-called "cookie cutter" CMBS loans.
Ray Potter, founder of New York-based advisory company R3 Funding, illustrated. In March, the firm was working to arrange a loan on a portfolio of Class B apartments in Gates, NY, that was shopped to CMBS and GSE lenders. At that time, the CMBS lender was the aggressive. But three months later, the same borrower was looking for a loan on six similar properties in the same area. This time, a Freddie Mac lender offered termes that were much more aggressive, including a four-year interest-only period and a spread that was 20 bps tighter. "It was a pretty easy decision to go with the Freddie Mac lender - there was more IO, more proceeds and a tighter spread," he added.
There continues to be a divergence between the type of borrowers that CMBS lenders and GSEs are looking for. CMBS lenders tend to offer higher pricing and pursue smaller borrowers, Donovan noted. Both groups of lenders, however, are similar in terms of client base and execution. That means increased competition from Fannie Mae and Freddie Mac may affect borrowers in small ways, such as providng another year of interest-only or a particular structure that is more effective, he added.
On the syndicated lending side, the GSEs are about 20 basis points cheaper than the bank market right now. "But if you compare teh syndicated loan product to Fannie Mae and Freddie Mac, it's very different. The execution is more like a CMBS loan, whereas we are floating-rate, three- to five-year lender," Galligan said.
Subscribe to:
Posts (Atom)