RISMedia's Real Estate Magazine

OCT 2018

Real Estate magazine is the industry's leading source for real estate news and information since 1980. Published monthly by RISMedia, Real Estate magazine offers timely and relevant real estate news to the industry's top brokers and agents.

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RISMedia's REAL ESTATE October 2018 15 {Policy Matters} FHFA Ends Single-Family Rental Pilot Program This column is brought to you by the NAR Real Estate Services group. by Vijay Yadlapati In the wake of the financial crisis, nearly eight million single-family homes transitioned from owner- occupied to rental homes, limiting the supply for would-be homebuyers, driving up home prices, and weighing on the homeownership rate. Histori- cally, most single-family rentals have been owned by mom-and-pop opera- tions, but Wall Street investors made moves during the recession, buying homes with cash at depressed pric- es or in foreclosure. As home prices rose and bargains disappeared, investors clamored for ways to reduce costs and maintain stability in their businesses. As a result, the FHFA's single-family rent- al pilot program was born. In Janu- ary 2017, Fannie Mae guaranteed a $945 million portfolio of loans owned by Invitation Homes Inc., Blackstone Group LP's single-family rental business. The deal effectively financed Invitation Home's portfolio at a low rate, allowing it to take cash from the deal to expand operations. At the time, NAR raised concerns about this deal, which Blackstone Group indicated in regulatory fil - ings would be used to finance its purchases of single-family homes in California, Florida, North Carolina and other areas across the country that would be rented out in markets with limited supply. NAR also argued that, rather than focusing on allow- ing well-qualified Americans to build wealth through affordable mortgage options, Fannie Mae was actively financing large institutions to com- pete with them. These investors did not expand the affordable housing stock; rather, in the limited market, they drove up rents and removed af- fordable inventory from the hands of prospective American homeowners. The longstanding mission of the FHFA and the Enterprises, estab- lished by Congress, should be to pro- mote a liquid and efficient national housing market while maintaining the safety and standards of loans guaranteed by the Enterprises. This means providing qualified American consumers with an affordable al- ternative to FHA, not financing Wall Street landlords, subsidizing the pur- chase of underwater mortgages to investment banks, or selling homes in bulk to large investors. Following the Fannie Mae and In- vitation Homes deal, Freddie Mac decided it also wanted to enter the blossoming business of capital- izing on single-family rentals. Prior to FHFA's announcement in August, Freddie Mac beat out two private lenders to finance a single-family rental portfolio. Specifically, the deal guaranteed a $509 million loan that facilitated Front Yard Residential Corp., a buyer of rental homes, to purchase a competitor. Freddie Mac also provided a guarantee on a $7.8 million loan that enabled Promise Homes Co. to acquire 117 homes in the Southeast. At a time when we're seeing a his - torically low homeownership rate, our nation needs the Enterprises to bolster homeownership opportuni- ties for millions of responsible, mid- dle-class American families. RE Vijay Yadlapati is a senior policy representative for the National Association of REALTORS®. I n a win for prospective homebuyers across the country, the Federal Housing Finance Agency (FHFA) announced on Aug. 21, 2018 that Fan- nie Mae and Freddie Mac (the Enterprises) will end their single-family rental pilot programs. The FHFA found that the institutional, single-fam- ily rental investor market is performing well without the liquidity provided by the Enterprises. Moreover, the Enterprises will limit their participation in the single-family rental market to their prior investments over the past two years. This announcement was celebrated by the National Association of REALTORS® (NAR), which has long advocated for ending the Enterprises' expansion into the single-family rental market while inventory shortages increase across the country.

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