Recursion Data Cited in Commercial Mortgage Alert Article on Fannie Mae Pullback from 35-Year Multifamily Mortgages
An article published in Commercial Mortgage Alert on June 9 stated that:“Fannie Mae will no longer offer 35-year amortization schedules on loans financing market-rate multifamily properties.”
They went on to state:“Loans with 35-year amortization schedules accounted for 26.5% of Fannie multifamily loans in May, the highest portion on record and up from 6.1% in the same month a year ago, according to data from Recursion Co., which has amortization data dating to 2016. The research firm also reported that Fannie notched $4.25 billion of multifamily business in May, down 14% from last year.”
The new policy takes effect on June 12. Loans with 35-year schedules providing support to affordable projects will continue to be offered.
Recursion is pleased to be the preferred source for mortgage data and analytics for key information providers in the mortgage market.
On June 20th, MSCI Executive Director Yihai Yu published a report “Agency MBS Are Going Social”, describing the data disclosed by the GSEs in the social data space. He goes on to describe how the release of this data enhances their prepayment models. We are pleased to see that they cite Recursion data in their efforts.
Recursion is devoted to providing its clients with cutting-edge analytic tools to access timely and clean mortgage data at a deep level of detail conduct research of great benefit to all the participants in the mortgage market.
As famous investor Warren Buffett once stated, “Only when the tide goes out do you learn who has been swimming naked.” Well, it turns out that only in a declining market can you see which segments are resilient. In this case, we will look at Planned Unit Developments or PUD’s. A PUD is a planned neighborhood, generally consisting of a group of single-family homes that are bound together by a Homeowners Association (HOA). In this manner, it is like a condo, with the significant difference that the property is usually a stand-alone structure that the buyer owns along with the lot on which it is located. Details about eligibility can be found in Fannie Mae’s selling guide.
Below finds the ratio of purchase mortgage deliveries from PUDs to those of 1-4 unit conventional loans:
The release of the Agency performance data in early May provided confirmation that the dip in Early Payment Defaults we have witnessed over the last three months ended a 16-month long uptrend in this statistic for FHA loans. A similar but far more muted pattern can be seen for VA and conventional mortgages. In a previous post, we speculated that the uptrend was correlated with the higher inflationary trend observed since early 2021. Below please find an update of the chart:
As daily April Agency mortgage loan delivery data completed, we found convincing evidence that the freeze in market activities we have witnessed since the fourth quarter of 2022 is continuing, although there are some new twists.
Here is the chart for the loan counts of purchase market deliveries to the GSEs back to 2019. Rather than do this as a time series, we stack the years over an annual monthly x-axis to better correct for the seasonality in the time series:
The recent release of “Social Scores” on the part of the GSE’s serves to point out the broad range of ESG issues facing the mortgage market. Of course, this covers a lot of policy territory, and over time investors, lenders and policymakers will have to come to grips with the details associated with these concerns. In today’s post, we look at environmental issues related to the condo market.
These issues came to a head with the disaster in Surfside Florida in June 2021, when the partial collapse of Champlain Towers South, a 12-story condo, resulted in 98 deaths and over $1 billion being awarded to victims in a class action lawsuit. Implications for regulation and insurance costs continue to be felt as the event brought home the immediacy of issues surrounding climate change to the general public.
In October 2021, Fannie Mae issued a Lender Letter presenting tightened requirements that impact the eligibility of loans made in buildings with five or more attached units. These new policies were “designed to support the ongoing viability of condo and co-op projects…(as) aging infrastructure and significant deferred maintenance are a growing concern across the nation.” These new standards came into effect on January 1, 2022. Among other things, they may land a building on an “unavailable” status if there is significant deferred maintenance, failure to pass local regulatory inspections, or not meeting the 10% budget reserve requirement.
To see if there is any impact, we start with a look at Freddie Mac and Fannie Mae condo loan deliveries from January 2019 to March 2023. During this period, the two Enterprises delivered 1.16 million purchase loans securitized by a condo, of which Fannie Mae generally had a share of about 57%:
Since the end of last year, the Government Sponsored Enterprises have released so-called “Social Score” Indexes that are made to appeal to ESG investors. Both Fannie Mae and Freddie Mac produce scores at the pool level based on a variety of social metrics. The following methodology summary comes from Fannie Mae (Freddie Mac has adopted the same methodology as Fannie Mae’s):
In a previous note, we looked at mortgage trends derived from the recent release of 2022 HMDA data. Of course, HMDA is a prime data source for analysts and policymakers who seek to understand how social and economic trends interact. The most discussed issue is the distribution of originations by race. Below find a bar chart for the share of originations by race annually from 2004-2022 by loan count: