FHA and HUD to Undergo Further Revamp, Fannie Mae Unfazed


It’s business as usual for Fannie Mae—despite ongoing talks of an agency phase out—while the U.S. Department of Housing and Urban Development and its Federal Housing Administration are in the process of making serious changes, according to industry sources.

SEE ALSO: Fannie Mae’s Jeffery Hayward Talks Affordable Housing, Millennials and Zoning

At the MBA CREF 2015 conference in San Diego, Fannie announced annual multifamily originations of $28.9 billion in 2014, up slightly from $28.8 billion in 2013.

Fannie Mae Headquarters.
Fannie Mae Headquarters.

“This is a cyclical business and we’re in the middle of some of the best times this business is going to have,” the GSE’s head of multifamily, Jeffery Hayward, told a group of reporters on Monday morning. He pointed to the growing number of renters nationally and low vacancy rates in the U.S. multifamily market.

Mr. Hayward said he expects Fannie’s refinance business—which traditionally makes up two-thirds of the GSE’s multifamily portfolio—to become an even larger portion of the pie in 2015, due to sustained low interest rates.

Furthermore, speculation about the Johnson-Crapo bill, a proposal that would wind down the GSEs, is not interfering with business. At Fannie, the “biggest concern right now is the work that needs to be done,” Mr. Hayward said. “We structured the business so that no matter what Congress decides to do, we’re prepared to continue serving our customers.”

Fannie’s multifamily chief operating officer, Michele Evans, echoed that sentiment. “We’ve been in conservatorship for a long time,” she said. “During that time, we’ve stayed laser-focused on our platform and the business that we do.”

Meanwhile, HUD is prepping to undergo an extensive reorganization. The agency’s deputy assistant secretary for multifamily housing programs, Benjamin Metcalf, spoke about changes in the air at a panel on Monday.

“Today is a big day in D.C.,” he told a packed room. “Today the president is delivering his budget request to Congress—his vision for the work that we need to be doing to make government work.”

HUD is in the process of shifting from an operational model of 53 offices organized throughout 17 hubs around the country to a “five-region field structure” with 12 offices in and around New York, Chicago, Atlanta, Forth Worth, and San Francisco.

The reorganization, which Congress approved in April 2014, is being implemented in five phases, the first of which took place in the Southwest late last year, Mr. Metcalf said. The federal agency is now working on revamping its operations in the Midwest and will begin doing so in the Southeast in July 2015. After that, the Northeast and the West will make up the final two phases of the reorganization.

HUD is now hiring in many of those regions to maintain its headcount of 1,250, as some of the agency’s employees retire and take on new jobs, Mr. Metcalf said.

He also highlighted several new initiatives for affordable housing developers that provide greater allowance for equity buy ins, bridge loans and subordinate debt with a more favorable vacancy policy. Mr. Metcalf also said HUD is liberalizing its policy towards financial institutions that play a dual role on a transaction as an equity provider and lender.

“It’s a good thing when private capital can do a better job than FHA,” he said. “But FHA needs to remain relevant, so that when there is a counter-cyclical need, the government agency can step up.”

Total FHA financing for multifamily properties through HUD’s Multifamily Accelerated Processing program fell from its high-water mark of $17 billion in 2013 to $10 billion in 2014.

“That decline was due to increasingly aggressive pricing on refi loans from private capital sources, such as banks, CMBS shops, and life companies,” Mr. Metcalf said. “By contrast FHA’s new construction/sub rehab lending and affordable lending have remained strong.”

FHA did $2 billion in firm commitments on affordable developments last year and is on track to do another $2 billion this year, the federal employee noted. He was hesitant to speculate about 2015, however, and declined to give origination projections.

“The goal is not to grow our market share, it’s to make sure that segments of the market that don’t have access to capital do have access to capital,” Mr. Metcalf said. “We have a more empowered staff now. We have a regional leadership in place that couldn’t have happened when we were scattered across so many sites.”