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Opinion, commentary, and analysis on everything that makes the U.S. housing economy tick -- not to mention the ghosts in the machine, too. Written by HW's team of editors and reporters each business day.
Investments

Freddie Mac CEO: We’ll make crisis-era foreclosure preventions permanent

Also sees no end to multifamily boom

November 1, 2016

The CEO of Freddie Mac, Donald Layton, admitted to being in particularly good spirits this morning on a call with HousingWire.

And he has every right to be.

Freddie Mac just posted a great third quarter, with promise of a brighter future ahead.

As part of its third-quarter filing, Freddie Mac declared it helped approximately 16,000 borrowers avoid foreclosure. Most of that is dealing with crisis-era mortgages, but Layton revealed that this strategy is changing.

Freddie Mac is now working with its regulator, the Federal Housing Finance Agency, to create permanent foreclosure-avoidance programs as HAMP and HARP look to expire.

Layton’s comment indicates that the sad chapter of the subprime crisis is coming to a close, as fewer defaulted mortgages, originated during financial-crisis-era vintages, need to be dealt with.

Now, as part of the regular course of business, and with foreclosure still the option of last resort, Layton said efforts are being made to make permanent a government-defined method for handling the modification of distressed mortgages.

“These crisis-era programs are not disappearing, the new solutions will be permanent,” he said, without giving a specific timeline. Currently, both HAMP and HARP are set to expire at the end of next year.

Rental boom here to stay

Additionally, Freddie Mac reported that more than 165,000 multifamily rental units received financing through its commercial real estate division.

“The multifamily space has been growing rapidly for the last several years, as has Freddie Mac’s share of that market,” Layton said.

The reasons for strong rental demand are not going to change overnight, so Freddie remains committed to growing that share, Layton said, adding that commercial real estate is reputed to be cyclical and, if so, the rate of increase is slowing down.

Nonetheless, “The fundamentals remain favorable,” he added. Those fundamentals include rising rents, lower vacancies and a willingness to live in urban centers where buying is not as popular of an option.

As for the financing available from Freddie Mac to the multifamily space, a big winner so far is Freddie’s Small Balance Loan ($1 million to $5 million for projects with 5-50 units). 

“In the past two years, since launch in September 2014, we’ve done $4.5 billion in volume, 1,800+ loans and 75,000+ units,” explained Freddie Mac spokesperson Brad German in a follow-up exchange. “There were 17 securitizations under our K-Deal risk-transfer program backed by SBLs.”

 

 

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