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Forum Spotlight: GSE/Multifamily Lenders

October 30, 2023

Together, Kate Whalen (Forum Chair), Ahmed Hasan (Chair-Elect), Emily Schultz (Past Chair), along with Jason Griest and Alonzo White (both GSE representatives) form the “Leadership Working Group” of CREFC’s GSE/Multifamily Lenders Forum. Importantly this group sets the agendas and priorities for the Forum, as well as represents their constituencies on CREFC’s Policy Committee.

Key GSE/Multifamily Lenders Focus Areas:

• Macro volatility - how are rising rates and fluctuating credit spreads impacting issuance;
• Availability of credit in the wake of the regional banking crisis;
• Upcoming FHA scorecard and updates around how any changes may impact 2024 business.

What they’re saying: The GSE and multifamily arena stands out as an area of strong credit amid a tidal wave of concerns in the commercial real estate sector. Yet, heightened macro volatility and continued elevated benchmark rates, have caused multifamily loan originations and securities issuance to remain significantly depressed.

By the Numbers. CREFC polled the audience at its June 2023 annual conference and found that over 50% of participants expected GSE multifamily issuance to end 2023 north of $100 billion. Today, that goal is unlikely to be met for two reasons:

• A significant valuation gap exists between buyers and sellers, and
• Considerations around mission driven business.

CREFC is hosting its fall DC Symposium on November 28 with FHFA Director Sandra Thompson speaking with CREFC’s Executive Director, Lisa Pendergast. Attendees will be eager to hear the Director’s thoughts on issues such as the state of multifamily housing, housing affordability, and tenant protections.

Key Policy Issues:

SEC’s Conflict of Interest in Securitization Proposal

• The proposal is intended to prevent securitizers from designing a transaction to fail and then profiting from a bet against that transaction.
• The definitions are broadly written and could engulf numerous CMBS participants and a broad range of “conflicted activities” that go beyond shorting a transaction. GSE securities are not exempt from the proposal.
• CREFC submitted two comment letters on the issue and is engaging with lawmakers on Capitol Hill.

Basel Endgame Capital Proposal

• The federal banking regulators have proposed raising capital on banks with $100 billion assets and above.
• The proposal will alter the risk weights and capital requirements for multifamily loans and securities, which could impact bank participation with the GSEs and their securities.
• The proposal may affect bank trading of GSE CMBS, but not necessarily bank investments in GSE CMBS.
• GSE CMBS held for investment are subject to a 20% risk weight, which is not changing under the proposal. GSE CMBS held for trading are subject to a different formula to calculate risk weights, and that formula is becoming significantly more punitive.

Community Reinvestment Act: The banking agencies recently finalized the Community Reinvestment Act, which will have an impact on how banks support affordable housing. CREFC is analyzing the final rule.

Tenant Protections: CREFC joined with other trade organizations in responding to the FHFA’s RFI on tenant protections. The letter urged the FHFA not to unduly complicate the compliance regime or impose harmful rent control policies.

What's next: Forum leaders look forward to presenting CREFC members with an update on their forum at the Annual January Conference in Miami. Soon after, the chairs will seek nominations for the next Chair Elect to join their leadership slate.

To join the GSE/Multifamily Lenders Forum, please register here. For any forum related questions, please contact Kathleen Olin

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Forum Spotlight: GSE/Multifamily Lenders

February 13, 2023 

Together, Emily, Kate, Bill, Alonzo, and Jason form the “Leadership Working Group” for CREFC’s GSE/Multifamily Lenders Forum. Importantly this group sets the agendas and priorities for the Forum, as well as represents their constituencies on CREFC’s Policy Committee.

Key GSE/Multifamily Lenders Focus Areas

• FHFA Scorecard: Affordable housing goals now based on percentage of total rather than absolute dollars
• Continued housing shortage and how the agencies can help; big “A” affordable
• Trends in agency credit underwriting and loan structures

What they're saying: Conversation at CREFC’s January conference focused on recent rent growth; panelists agreed 10%-20% rent growth is likely over for now, but that multi fundamentals remain solid. The pricing impasse between buyers and sellers remains, yet some semblance of market stability would bring increased transactions in the second half of 2023.

Economic volatility, specifically rising rates and record high cap costs, has motivated the agencies to get creative on shorter-term fixed-rate offerings:

• Five- and seven-year terms with flexible prepay options are gaining momentum
• Freddie Mac is issuing more single-property/single-pool securities (PCs); many with 5- and 7-year terms
• Fannie Mae also is seeing an increase in 5- and 7-year production; gaining popularity are loans with a 5-year term and 3-year yield maintenance structure

So far, investor demand has met supply, despite some investors at CREFC’s Miami conference expressing doubt about demand for short-term securities with wider windows.

Speculation persists on the fate of multifamily loans originated by debt funds and others in 2020-2022 given today’s higher rates and reduced liquidity. Conference goers discussed the potential necessity for mezzanine and preferred equity, rescue capital, distressed sales, or cash-in agency take outs.

Key policy issues:

• Addressing a threat to 144A bond market including SASB CMBS and CRE CLOs
• Advocating for a multifamily exemption from the revised Home Mortgage Disclosure Act (HMDA) multifamily reporting requirements.
• SEC’s climate reporting rule and other proposed regulations.
• Passage and implementation of the LIBOR Act for tough legacy contracts.
• White House initiated “Blueprint for a Renters Bill of Rights,” including some administrative actions by federal agencies, with the goal to increase and preserve affordable housing and to ensure that housing is safe and fair.

What’s next:  Forum leaders are seeking nominations for the next Chair Elect to join their leadership slate and look forward to presenting CREFC members with an update on their forum at the Annual June Conference in New York City.

To join the GSE/Multifamily Lenders Forum, please register here. For any forum related questions, please contact Kathleen Olin.

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CREFC GSE/Multifamily Lenders Forum

August 1, 2022

GSE Representatives: Alonzo White Principal Fannie Mae Jason Griest Vice President, Multifamily Capital Markets Securitization Freddie Mac

The post COVID explosion of debt sources for housing investment created strong market competition that often rendered the GSEs less competitive. Even so, there seemed to be enough volume for all debt sources to gain ample traction. At CREFC’s June Conference, the GSE panel highlighted more conservative underwriting and weakening exit assumptions. In times of economic uncertainty, the agencies tend to stand out as a steady source of debt and liquidity. A heightened focus on affordable housing demand and trends is top of mind with the need for the agencies to serve their mission goals with providing ample liquidity for affordable and workforce housing, especially in high-cost areas. Sourcing and financing affordable projects is challenging today given lower availability coupled with changing migration trends. Looking ahead for opportunities, GSE forum leadership has discussed ESG issues with a focus on green and social bonds, Single Family Rental (SFR), Build to Rent (BTR), and adaptive reuse. Challenges for the year include managing the FHFA’s cap and goals for affordability, and whether they will have sufficient remaining liquidity for lenders to serve their non-mission driven clients.

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CREFC GSE/Multifamily Lenders Forum

February 22, 2022

Meet our leadership team:

CHAIR	CHAIR-ELECT	PAST-CHAIR
Bill Fecteau Executive Director, Capital Markets PGIM Real Estate	Emily Schultz Managing Director, Head of Fannie Mae Originations Berkadia	Michael Case VP - MF Capital Markets, Loan Pricing Freddie Mac

Together, Bill, Emily and Michael form the “Leadership Working Group” for CREFC’s GSE/Multifamily Lenders Forum. Importantly this group sets the agendas and priorities for the Forum, as well as represents their constituencies on CREFC’s Policy Committee.

Conversations at CREFC’s January conference focused initially on great multifamily fundamentals and how well they have performed during COVID. While the crisis isn’t over, multifamily is expected to do quite well for the foreseeable future—with an abundance of equity that needs to be deployed, and an abundance of debt available to lever.

Affordable housing market demand/trends are also top of mind with the need for the agencies to serve the mission goals with more affordable and workforce housing, especially in high-cost areas. Finding affordable projects—with lower availability in recent years coupled with migration—is key.

Recent market volatility caused by the imminent Fed tightening cycle and the Russia-Ukraine crisis has reduced demand for duration products such as ACMBS. The near-term challenge for Fannie and Freddie will be to adjust credit spreads to be competitive. The good news is that while Jan-Feb 2022 ACMBS issuance is lower than 2021, issuance is still higher than pre-COVID levels.

Looking ahead, for opportunities, the leaders have discussed ESG with green and social bonds. Challenges for the year include managing the FHFA’s cap and goals for affordability, and whether they will produce enough for lenders to serve their non-mission driven clients.

Additionally, these recent policy issues are of interest for GSE/Multifamily Lenders:

• Home Mortgage Disclosure Act (HMDA) reporting
  
  
• CFPB’s 1071 Small Business Reporting
  
  
• FinCEN’s Anti-Money Laundering in Real Estate ANPR
  
  
• GSE Enterprise Capital Rule (recently finalized)

Forum leaders are currently considering nominations for the next incoming chair to join their leadership slate and formulating the agenda for the forum session at CREFC's Annual Conference in June.

To join the GSE/Multifamily Lenders Forum, please register here. For any forum related questions, please contact Kathleen Olin.

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