Fannie Mae Multifamily Head, Agency Vet Jeffery Hayward

Jeffery Hayward.
Jeffery Hayward.

When on the road, Jeffery Hayward often carries a personally customized guide, with the addresses of all the multifamily buildings that Fannie Mae has financed in the area. Then the head of the government-sponsored enterprise’s Multifamily Mortgage Business drives from building to building.

“I want to see what we are financing,” Mr. Hayward told The Mortgage Observer recently, during a series of meetings in his Washington, D.C. office. “I have actually walked a lot of the properties that we financed—I know what they look like, I have seen the tenants.”

When describing Mr. Hayward colleagues often mention his affable nature and his ability to put people at ease, even through tough times. His energy and his ability to listen, several people said, were pivotal in reenergizing the division. In fact, the first year under his leadership, which began in January 2012, Fannie Mae had its third highest year for loan acquisitions for financing to the multifamily market.

After 26 years at the GSE, spent both in the single family and in the multifamily business, Mr. Hayward speaks about working at Fannie Mae in almost mythical terms—referencing its mission to bring liquidity to the market and, more broadly, to solve the nation’s housing problems.

“When you ask people here what really gets them excited, it is knowing that you are helping the country and families to have decent rental housing,” he said. “It might sound corny, but this really is how people feel.”

When Mr. Hayward took over from Kenneth Bacon, who retired after having run the multifamily division since 2005, he found a business in good shape and in rebound after the recession, he said. In 2012, for instance, Fannie Mae provided financing for almost 560,000 units of multifamily housing, for a total volume of $33.8 billion. This was up from 423,000 units and $24.4 billion in financing the year previous.

“As a single entity we probably bought or acquired more multifamily mortgages than any single lender in the United States and we did it safe and sound, meeting our debt coverage standards and meeting our LTV standards,” he said.

Approximately 98 percent of the loans, for a volume of $33.1 billion, were delivered through mortgage-backed security executions. Enhancing the securitization program was one of the main goals that Mr. Hayward had set.

“Last year we kept enhancing a program we call GeMS [Guaranteed Multifamily Structures],” he said. “We expanded the appetite of the investors and brought in more private capital.”

Launched in 2010, the GeMS program involves the creation of structured multifamily securities created from MBS collateral. These structures, which look much like CMBS, attract larger institutional investors. The issuance of GeMS increased from $6 billion in 2011 to $10 billion in 2012. On March 14, 2013, Fannie Mae priced a $904.3 million multifamily DUS REMIC under its Fannie Mae GeMS program, the third so far this year. So far in 2013, total GeMS issuances have been $3.2 billion. Kimberly Johnson, senior vice president of Multifamily Capital Markets, estimated that GeMS issuances will reach approximately $12 billion by year’s end.

Being able to create these structures “has attracted hedge funds and other valuable players, so we are getting a lot of secondary trading and a lot of better liquidity,” Ms. Johnson said. “We started the GeMS program in 2010 before Jeff’s time, but we’ve seen a real increase in issuance and he has been a very big supporter of the GeMS program.”

For 25 years, the DUS program has granted approved lenders the ability to underwrite, close and sell loans on multifamily properties to Fannie Mae, retaining a risk position in the mortgages. In 2012, Fannie Mae’s DUS lenders delivered 98 percent of the company’s multifamily loan acquisitions. “It’s terrific to be part of a program like DUS where it’s almost like you are in a band together—a band that has been playing successfully for 25 years—where you all play the same tune, you all know the notes and it’s a perfect pitch every time it comes out,” Mr. Hayward said. The program’s 25th anniversary will be celebrated at a conference with the DUS lenders in May. Mr. Hayward had his own silver anniversary with Fannie Mae last year.

Originally from Philadelphia, and a graduate of nearby Widener University, Mr. Hayward worked at Germantown Savings Bank before joining Fannie Mae in 1987. Zach Oppenheimer, currently senior vice president of Customer Engagement at the agency, interviewed him at the time. From the start, he said that he recognized Mr. Hayward’s leadership qualities.

“He is very direct and very honest,” Mr. Oppenheimer said. “One of the attributes I found appealing when I interviewed him for his first job at Fannie Mae is his candor, his honesty. He is very straight, very direct.” And then: “He also has a good sense of humor.”

Mr. Oppenheimer added that moving from the single family division to the multifamily division, as Mr. Hayward has done in his career, is relatively rare, but that it can be very useful to learn all facets of the business. Hired as a senior MBS representative, Mr. Hayward initially planned to become a Wall Street trader. He quickly changed his mind and Fannie Mae became part of his life. In the 1990s he took roles such as vice president for Quality Control and Operations and vice president for Risk Management—moving between offices in Philadelphia, Washington D.C. and Chicago. Between 2004 and 2010, he served as a senior vice president of Community Lending, the predecessor of the current multifamily division.

From 2010 to 2012, he was senior vice president of the National Servicing Organization, which at the time had to deal with 1.1 million delinquent loans.

“I generally like the challenges of leadership,” he said. “What I like the most is an opportunity to work with people to achieve a set of goals.”

Challenges certainly still abound at Fannie Mae, which together with the other GSE, Freddie Mac, has been under conservatorship and run by the Federal Housing Finance Agency since September 2008. The GSEs have been pivotal in keeping the multifamily market alive during the crisis, providing up to 87 percent of the multifamily mortgages in 2009, from their historical average of approximately 40 percent. The trend shows that the market is slowly returning to normal. According to the most recent data from Real Capital Analytics, in the first half of 2012, GSEs accounted for 64 percent of all multifamily mortgage originations, down from 68 percent in 2011.

This share of the market could decrease further, following Edward DeMarco, the acting Director of FHFA’s, announcement that in 2013 Fannie Mae and Freddie Mac will have to shrink by 10 percent their business in the loan market for multifamily homes.

New York Attorney General Eric Schneiderman and Massachusetts Attorney General Martha Coakley are currently leading a nine state coalition calling for President Barack Obama to replace Mr. DeMarco, saying that such policies are an “obstacle to progress” for homeowners and the overall economic recovery.

However, many players in the business pointed out that banks, insurance and CMBS were already expanding their share of multifamily originations.

“I don’t think it has any impact,” said Alan Wiener, head of Wells Fargo Multifamily Capital, which in 2012 was the second largest DUS producer after Walker & Dunlop and closed deals such as the $450 million loan on Manhattan Plaza, a 1,689-unit affordable housing property at 400 West 43rd Street. The GSEs, Mr. Wiener said “are needed both in the single and multifamily side for consistency and liquidity. I think they have a segment of the market that is anywhere from 30 to 40 percent, and it’s important to the economy, particularly with the expanding number of rentals that the country needs, to have continue liquidity in the marketplace.”

Grace Huebscher, president and chief executive officer of Beech Street Capital, pointed out that the market was already going in the direction of a natural reduction of volume from Fannie Mae and Freddie Mac. On the other hand, she defined as “naïve” the idea that the market could do without the agencies, which, she said, are particularly important for “large and sophisticated transactions.” She added that they also provide liquidity in secondary and tertiary markets. Beech Street Capital, the third largest DUS producer, in 2012 closed deals such as the $70 million refinancing of The Gotham, an apartment building at 255 Warren Street in Jersey City, N.J., and the $42.5 million acquisition loan for Ventura Colony Apartments at 875 Weber Circle in Ventura, Calif.

On the other hand, Sam Chandan, president and chief economist at Chandan Economics, pointed out that there might be some risks. “There is a danger that we will see lending withdraw from smaller secondary markets that are already underserved and not from the markets that are flush with lenders,” he said. This could be avoided, he argued, with a different mandate for the agencies. “Although they are instruments of policy, they land in competition with banks and life companies. They can make an enormous contribution in supporting multifamily outcome if their mandate is narrowed to those segments of the markets that are underserved.”

Mr. Hayward doesn’t seem to see much risk. Fannie Mae’s mission, he pointed out, remains clear. “The charter of the company says that you have to provide liquidity to the market place. In any place where there is liquidity needed you need to be there,” he said. “And so just by carrying out the function that we were intended to carry out we are going to be providing financing in tertiary and secondary markets.”

The reduction of Fannie Mae’s multifamily financing footprint, he said, can be achieved “through how you price and how you set credit standards.”

A passionate fan of every sport, with a special love of baseball—as evidenced by a personalized baseball jersey that hangs on the wall of his office—Mr. Hayward recognizes the importance of team work.

“The biggest thing that I would like to happen in 2013 is that I want to make sure that this is still a great place to work, that we keep our staff excited about the work they do, and they understand that they are vital to the marketplace,” he said. “I want to make sure that I personally do everything I can do to live up to the standard of the company.”

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