WASHINGTON, DC-On Tuesday we reported that the Inspector General of the Federal Housing Finance Agency wants to see new accounting methodologies used to better account for losses at the GSEs. Specifically, it wants to require Fannie Mae and Freddie Mac to charge off losses on loans on which borrowers have not made payments for 180 days. This begs the question for the commercial real estate space: how bad are those multifamily losses anyway?
Recently released figures by Freddie Mac show that they are low – indeed, losses have been historically very small in the GSEs' multifamily portfolios. Freddie Mac reported that it recently secured one of the industry's lowest delinquency rates at .09% as of June 30, 2013, compared to much higher rates in the industry for other lender and asset classes.
GlobeSt.com caught up with David Brickman, SVP of Multifamily at the GSE to discuss what he is seeing in this space, especially with its recent 50th offering of K-Certificates. Some excerpts from our conversation:
GlobeSt.com: What are you seeing in terms of loan demand?
Brickman: There is a slow adjustment to higher rate environment. The increase in rates has definitely had an impact and has contributed to slower pace of originations.
GlobeSt.com: Do you think the asset class is losing its appeal?
Brickman: No, we definitely see strong demand for multifamily product. The slower place of originations is more due to the basic economics of borrowing costs now being higher. A number of acquisition transactions have gone sideways and buyers and sellers have been forced to renegotiate. But that all happened earlier this summer. Now it seems people are adjusting to the higher rate environment that we are in.
GlobeSt.com: Will Freddie Mac finish the year differently than you anticipated?
Brickman: That is hard to say but we are experiencing the opposite seasonal pattern of originations that we usually do. By that I mean usually the second half of the year is stronger and Q4 is the strongest but this year that pattern is inverted.
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Erika Morphy
Erika Morphy has been writing about commercial real estate at GlobeSt.com for more than ten years, covering the capital markets, the Mid-Atlantic region and national topics. She's a nerd so favorite examples of the former include accounting standards, Basel III and what Congress is brewing.
