is predicting that the rental market will cool down this year. Median
U.S. rents grew at a 3.3 percent annual pace in December, to $1,381 per
month. This pace is expected to drop to 1.1 percent by December 2016,
with median rents rising to $1,396 per month. New apartments being built
in markets like Seattle and Washington D.C. is evidence of builders
trying to keep up with the demand. As more apartments become available,
rent prices should begin to decline, and it's expected that rent may
drop this year in some markets like Indianapolis, Oklahoma City and Las
Vegas. Although, rental decline is not expected to drop on the West
Coast, as rent in L.A. is expected to rise 2.8 percent this year and 5.9
percent in San Francisco. Overall, rents on a national level will not
rise as quickly as they have been and this year's expected hottest
markets like Omaha, Boise and Richmond will have a balance between
strong income growth, low employment and affordable rent.
Now, about rents and multi-family trends... did you know that Bloomberg reports that between 2011 and 2015 loans for multi-family developments at insured depository institutions increased 45%
and made up 17% of all commercial real estate loans held by financial
institutions? Regulators have indicated this will be one area they will
be closely reviewing when they examine banks in the coming year.
Fannie Mae and Freddie Mac expect to break more records this year in their lending on multifamily properties. That means both agencies will have to keep up the tremendously busy pace they set in 2015. And Greystone
has provided $18 million in Fannie Mae MAH loans to refinance three
affordable apartment communities owned in Tacoma, WA. The three
properties are in Lakewood Village, Chateau Rainier and DeMark
Apartments. The loan has a 30-year term with a fully amortizing
schedule, which includes 477 units and has floor plans ranging from one
to three bedrooms.
"What's the deal with the rising multifamily market?"
That was the question being asked at a recent gathering I attended.
Well, pick your poison: a large portion of aging boomers are choosing to
downsize and live in housing communities, millennials prefer the
flexibility of renting over owning, gross underemployment has created
economic barriers to potential buyers, stagnant wages haven't kept pace
with inflation, etc. That question could be the world's worst road trip
game, next to license plate poker. Needless to say, the American
consumer is demanding more multifamily dwellings.
According to the NAHB, multifamily housing starts,
at the end of 3Q15, were at a decade long high, with 425,000 starts.
So, where do all the cash flows from this sector end up? In mortgage
backed securities, specifically Multi-Family Mortgage Backed Securities
(MF MBS), and the agencies have an integral part in the process. FNMA, FHLMC, and GNMA makeup a large portion of the $1Trillion secondary market for
these products with market shares of: 26%, 24%, and 10%, respectively
(other market participants include CMBS, Banks/Thrifts, Life Insurance
Co's, and State/Local Agencies).
loans are made to borrowers under varying terms, such 10 years, 7
years, fixed-rate, adjustable-rate, full or partial interest only
periods. During the life of a multifamily loan, the balance is generally
amortized over an amortization term that is significantly longer than
the term of the loan. As a result, there is little amortization of
principal, resulting in a balloon payment at maturity. The borrower
usually repays the loan in monthly installments that may include only
interest for the entire term of the loan, only interest for a portion of
the term and then both principal and interest, or principal and
interest for the entire term of the loan.
are often issued with prepayment penalties that protect the investor in
case of voluntary repayment by the borrower. Prepayment protections are
most frequently in the form of lockout periods, defeasance, prepayment
penalties or yield maintenance charges. For those interested in these
features, here's how each works. Lockout Periods:
A prepayment lockout is a contractual agreement that prohibits any
voluntary prepayments during a specified period of time, the lockout
period. After the lockout period, some instruments offer call protection
in the form of prepayment penalties. Defeasance: With
defeasance, rather than loan repayment, the borrower provides
sufficient funds for the servicer to invest in a portfolio of Treasury
securities that replicates the cash flows that would exist in the
absence of prepayments. Prepayment Penalty:
Prepayment penalty points are predetermined penalties that must be paid
by the borrower if the borrower wishes to refinance. FNMA notes, "for
example, a 5-4-3-2-1 prepayment penalty point structure means if the
borrower wishes to prepay during the third year, the borrower must pay a
3% penalty for a total of $103 rather than $100." Yield Maintenance Charges: A yield
maintenance charge is the most common form of prepayment protection for
multifamily loans/securitizations. It is basically a repayment premium
that allows investors to attain the same yield as if the borrower made
all scheduled mortgage payments until the maturity of the security.
Yield maintenance charges are designed to discourage the borrower from
voluntarily prepaying the mortgage note. The yield maintenance charge,
also called the make-whole charge, makes it uneconomical to refinance
solely to get a lower mortgage rate.
servicing is pretty straight forward. The mortgage bank or a third
party may service multifamily loans going into an agency MF MBS. The
master servicer is responsible for day-to-day loan servicing practices
including collecting loan payments, managing escrow accounts, analyzing
financial statements inspecting collateral and reviewing borrower
consent requests. All non-performing mortgages are usually sent to the
special servicer. The special servicer is responsible for performing
customary work-out related duties including extending maturity dates,
restructuring mortgages, appointing receivers, foreclosing the lender's
interest in a secured property, managing the foreclosed real estate and
selling the real estate.
The MBA has released its Third Quarter 2015 Commercial/Multifamily DataBook
highlighting that the national economy has grown at a seasonally
adjusted annual rate of 2 percent during the third quarter, after
already having grown 3.9 percent in the second quarter. The unemployment
rate also declined to 5 percent in October due to an increase in job
growth. The commercial mortgage borrowing and lending sector increased
in the third quarter, and commercial and multifamily debt outstanding
also rose the same quarter. Banks contributed to 85 percent of the total
increase, adding $32 billion to their holdings of commercial real
estate loans, which is the largest amount since 2007. Total
commercial/multifamily debt outstanding debt reached $2.76 trillion at
the end of the third quarter, an increase of $38 billion. Multifamily
mortgage debt outstanding stood at $1.02 trillion, increasing 1.9
percent from the previous quarter.
to bonds & rates, I love it when the Fed says that inflation
remained subdued and global economic conditions are uncertain. When aren't global economic conditions uncertain? Yesterday U.S.
Treasuries recovered their pre-FOMC losses as investors appear to have
been braced for a hawkish surprise from the Fed. The FOMC held rates
steady, as was widely expected, and also failed to change its language
with respect to falling energy prices despite significant declines since
the FOMC's December meeting. The statement also said that the committee
is "closely monitoring" global financial and economic developments.
5-year Treasury auction met a poor reception (after a lackluster 2-year
auction on Tuesday) but the focus was on the overall bond market. It
"traded heavy" throughout the morning/early afternoon until the FOMC
statement after which everyone focused on the dovish tilt to the
statement. This quickly "gave a bid" to Treasuries which in turn helped
rates but pushed the stock market lower.
that the markets care about our actual data anymore, but we've had
Initial Jobless Claims for the week ending 1/23 (278k, down from 294k),
and December Durable Goods and Durable Goods ex-transportation (-5.1%,
worse than expected, and -1.2%). Coming up is more housing news, with
December's Pending Home Sales, and a $29 billion 7-year Treasury
auction. For numbers once again this week the 10-year's yield ended the
day at an even 2.00%, well below where it was when the Fed raised short
term rates, and this morning we're at 1.99% with agency MBS prices better by .125.
Jobs and Announcements
In job news Nexera Holding LLC achieved a significant milestone of $100 million in fundings in just 6 months since opening operations. CEO Steve Abreu wrote to say, "We launched our consumer direct channel newfi and wholesale division Blustream Lending
with a vision to set a new standard for efficiency, simplicity, and
transparency. Our unique, low cost business model and proprietary
technology have been key to a quick start in a very competitive market."
If you want to learn more about Nexera including career opportunities, please contact CEO Steve Abreu.
A growing retail lender in Arizona is searching for a Loan Servicing Manager.
"The Loan Servicing Manager is responsible for directing functions
related to Real Estate Secured Loan Servicing. Activities include
oversight of demands and payoff quotes, credit bureau disputes and
corrections, escrow maintenance and analysis, payment processing,
consumer loan bill maintenance, as well as monitoring system
maintenance. Functions also include management and oversight of
Qualified Written Requests and SCRA loans. The duties include assisting
the team, leadership, operational and technical support, as well as
management and oversight responsibilities. The person will supervise 5+
employees; college degree or equivalent work experience required." The
company is licensed in well over a dozen states, offers a full range of
products, and has a full slate of investor and warehouse approvals, and
is currently producing more than $1 billion per year. Confidential
inquires can be submitted to me at rchrisman@robchrisman. com - please specify the opportunity.
In interesting upcoming events Lenders One is hosting its Winter Conference in New Orleans March 6-9.
"Mortgage bankers from across the country will gather in NOLA for
exclusive networking, industry-leading education sessions, and inspiring
keynotes. Attendees will be able to participate in an interactive
award-winning event that will explore the powerful connections between
our members and partners through Dear World, an organization that has
sparked a global movement. We'll also hear from New York Time's and WSJ
best-selling author Adam Braun." For more information, contact Susan Malpocker.
And under the "interesting products" banner, "If you and your company are growing production through recruiting
and don't have a shared platform internally to support, organize and
unify the efforts in a collaborative way, it is time to learn
about Model Match. Model Match is a progressive software platform
built for the mortgage industry, laser-focused on helping with the
process of recruiting of 'passive' recruits in production. The
platform is designed to make it easier for mortgage companies, banks and
other financial services organizations build, hire and retain
production through recruiting. With a web and mobile platform, we
leverage proven Best Practices, Processes and Methodologies developed
over fifteen years by industry insiders and a team of business and
technology professionals. Model Match WILL help you understand WHO
the strongest fits are, and WHICH ONES will have greater performance and
longer retention. It is that simple! Our solution makes Sourcing,
Attracting, Hiring, Onboarding and Retaining production talent simple
and eliminates all the guess work. The Model Match solution efficiently and effectively supports infilling and strategic growth initiatives by leveraging a
company's best resources, its local managers, leadership teams, and
internal recruiting or business development groups. Set up a time to
meet with a live Product Expert to see exactly how Model Match can help
with your recruiting efforts. Schedule a Demo, email us, or give us a call at 949-344-2780.
According to STRATMOR's Originator Census in 2014, 38% of the overall originator population had been with their current lender for 1 year or less.
Further, more than a third of originators were recent hires, indicating
that lenders were actively recruiting and growing their originator
ranks. Did the same hold true for 2015? "Would you like to understand
how your retail sales force compares to the rest of the industry in age,
tenure, turnover and productivity? There
is still time to participate in this year's study covering 2015
results. STRATMOR is expecting more than 30 participant companies
covering more than 14,000 MLOs." For more information contact Jim Cameron or register here.