Nov. 11: Trends in multi-family housing and financing; housing in retirement; a fine Veteran’s Day tale

Don’t forget the restaurants that offer free meals to veterans today. Pass this list along to a vet, and hats off to those establishments. Many lenders are closed today, as are most banks although some bank-owned mortgage companies seem to be open. Today is indeed a federal holiday.


Congrats to President and CEO of Union Home Mortgage Corp, Bill Cosgrove, who has been honored with the Andrew D. Woodward Distinguished Service Award. “The esteemed award is presented to a member of the mortgage industry who has been recognized for his or her dedication and service to not only the industry but also to the Mortgage Bankers Association.”


And to Radian Group Inc. which received the 2016 Risk Maturity Model (RMM) award of distinction. “The RMM Recognition is given to organizations achieving high levels of Enterprise Risk Management (ERM) maturity, as defined by the RIMS, the risk management society, Risk Maturity Model. Radian Chief Risk Officer Derek Brummer commented, “We’re delighted to be recognized for the second year in a row for the excellence of our Enterprise Risk Management program and as the only mortgage insurance provider to achieve this honor.” A key product of Radian’s risk management program is its proprietary Mortgage Risk Navigator analytics and technology suite.  The platform combines cutting-edge mortgage performance modeling, data analytics and business intelligence applications to facilitate pricing and portfolio risk management of Radian’s mortgage credit products.


Most of us live in an apartment at one time or another. Many economists believe that the multi-family sector helps give us an idea of the general state of not only the housing market but also the economy in general. And with the slicing and dicing of last year’s HMDA data comes a wealth of information. The MBA reports that “Multifamily mortgage borrowing and lending set a new record in 2015. Demand for mortgages was driven by strong property fundamentals, increasing property values, a robust transaction market and low interest rates. Supply of mortgage capital came through record levels of lending by banks, Fannie Mae, Freddie Mac and life insurance companies.


“A total of 2,855 lenders made 46,920 multifamily loans for a total of $249.8 billion in 2015, 28 percent higher than the total dollar volume in 2014. JP Morgan Chase & Company (7,578 loans for $23.9 billion) and Wells Fargo (1,827 loans for $23.7 billion) were the two largest lenders by dollar volume. Commercial bank, thrift and credit union portfolios provided the most multifamily loans by number (35,281 loans totaling $88.4 billion) while Fannie Mae, Freddie Mac and FHA accounted for the largest dollar volume (6,252 loans totaling $94.1 billion).


Moving from 2015 into 2016, commercial and multifamily mortgage debt outstanding grew to a record high of $2.9 trillion during the second quarter of 2016. Multifamily mortgage debt outstanding rose to $1.09 trillion (also a record), an increase of $27.6 billion, or 2.6 percent, from the first of quarter of 2016.


Banks accounted for 90 percent of the total net increase, adding $36 billion to their holdings of commercial and multifamily real estate loans during the quarter. Agency and GSE portfolios and MBS holdings had the second largest gains, increasing by $13.8 billion, or 2.9 percent, and life insurance companies were next with an increase of $8.9 billion, or 2.2 percent.


CMBS, CDO and other ABS issues saw the largest decrease in their holdings on record, with a decline of $20.9 billion or 4.1 percent. Finance companies’ commercial/multifamily mortgage holdings declined by $2 billion over the quarter. During the second quarter, agency and GSE portfolio and MBS surpassed CMBS to become the second largest holder (behind banks) of commercial and multifamily mortgage debt. Regulators overseeing the bank, CMBS, GSE and other markets have been weighing in on commercial and multifamily mortgages. Earlier this year the MBA issued this informative report. The MBA’s full report on commercial/multifamily mortgage debt outstanding can be downloaded here.


Speaking of which, and this is not a paid ad, AssetAvenue, an online lender for real estate investors, announced a new loan product to finance the purchase of rental properties including single-family homes, two to four multitenant units, condos and townhomes. The company’s customers, many of whom are fixing and flipping homes, specifically asked for a product that would expand their investment portfolio and enable them to collect income from rental properties. AssetAvenue listened and delivered.


“The loans are designed to be more commercial in nature than a traditional residential loan. To accomplish this, AssetAvenue will place a premium on an individual’s Debt-Service Coverage Ratio (DSCR), as opposed to the Debt-to-Income Ratio (DIR). As a result, loan approval is primarily driven by the property’s rental income, with minimal requirements regarding personal earnings. This unique feature opens up lines of credit to entrepreneurs who are often rejected by traditional lenders.”


Details about AssetAvenue’s new 30-year fixed rental loan include: loan amounts from $75,000 – $1 million with up to 75% LTV. Primary and Secondary markets are available and first lien position is required. Interest rates range from 6.5 – 7.5% and applicable Broker Fees are protected. Other terms to be considered will include borrowers with special situations and foreign nationals. AssetAvenue’s loan prepayment penalties expire after three years. Currently, the loan is available in 44 states.


And certainly, there are demographics impacting this. Don’t forget that this year the U.S. homeownership rate fell to a five-decade low.  But household formation climbs as more Americans look to rent, which will eventually lead to pent up demand. The homeownership rate, the proportion of households that are owner-occupied, fell to 62.9%, half a percentage point lower than the second quarter of 2015 and 0.6 percentage point lower than the first quarter 2016, per the Census Bureau. That was the lowest figure since 1965.  There are many ways to interpret the numbers. Part of the story is the catastrophic housing market collapse, which was especially severe for Generation X—those born from 1965 to 1984.


Some chose to live in multifamily housing, others do because of their personal finances, including their debt load. One would like to think that older folks have paid off all their debts, including their mortgage, and live in their debt-free home as they head into retirement – but that is not always the case.


Plaza Home Mortgage reported that, “The percentage of households aged 55 and older with some form of housing debt increased by 8% between 2001 and 2013, according to the brief noted below. The debt burden – defined as the median ratio of housing debt to household income – increased by more than 50% for the same age group. While home values are increasing across many parts of the country, so are levels of mortgage debt held by older homeowners, which could impact their future retirement security, per an Issue in Brief published by the Center for Retirement Research at Boston College. As the CRR gathers data for its 2016 National Retirement Risk Index, which it publishes every three years to gauge retirement preparedness, “one clear trend that has emerged is an increase in the percentage of older households carrying mortgage debt into retirement and an increase in the amount of this debt,” reported the authors of How Much Does Housing Affect Retirement Security? An NRRI Update.


Turning to the bond market, it is closed today. Any company setting rates is probably looking at yesterday’s pricing, what may have happened overseas, and adding a cushion – it certainly has been a volatile week. Thursday (yesterday) U.S. Treasuries took a drubbing for a second-straight session as investors digested Tuesday’s election results and speculated on the possible economic policies of the incoming Trump administration. As ThomsonReuters put it, “A late yield surge into and after the close wreaked havoc on MBS which otherwise traded relatively well for most of the session as global bonds caught up with treasuries following the post-election trashing of treasuries on Tuesday.”


Some lenders re-priced for the worse as the 10-year note price worsened .5 to end the day yielding 2.12% though traded lower afterwards taking out the intraday high of 2.125%. Current coupon agency MBS prices and 5-year Treasury securities worsened about .250.


Don’t forget that the cash Treasury market is closed today for Veterans Day, as is MBS trading, although interest rate futures will trade on the Chicago Mercantile Exchange with normal trading hours. Despite the day honoring our veterans, some lenders are open and a 2nd tier piece of economic information is being released: the University Michigan Sentiment Index.



In September of 2005, a social studies schoolteacher from Arkansas did something not to be forgotten. On the first day of school, with permission of the school superintendent, the principal, and the building supervisor, she took all the desks out of the classroom. The kids came into first period. They walked in – there were no desks.

“Ms. Cothren, where are our desks?”

She replied, “You can’t have a desk until you tell me how you earn the right to sit at a desk.”

They thought, “Well, maybe it’s our grades.”

“No,” she replied.

“Maybe it’s our behavior”

She told them, “No, it’s not even your behavior.”

And so they came and went, the first period, second period, third period – still no desks in the classroom. Kids called their parents to tell them what was happening and by early afternoon television news crews had started gathering at the school to report about this crazy teacher who had taken all the desks out of her room.

The final period of the day came and as the puzzled students found seats on the floor of the desk-less classroom.

Martha Cothren said, “Throughout the day no one has been able to tell me just what he or she has done to earn the right to sit at the desks that are ordinarily found in this classroom. Now I am going to tell you.”

At this point Martha Cothren went over to the door of her classroom and opened it. Twenty-seven (27) veterans, all in uniform, walked into that classroom, each one carrying a school desk. The vets began placing the school desks in rows, and then they would walk over and stand alongside the wall. By the time the last soldier had set the final desk in place those kids started to understand, perhaps for the first time in their lives, just how the right to sit at those desks had been earned.

Martha said, “You didn’t earn the right to sit at these desks. These heroes did it for you. They placed the desks here for you. They went halfway around the world, giving up their education and interrupting their careers and families so you could have the freedom you have. Now, it’s up to you to sit in them. It is your responsibility to learn, to be good students, to be good citizens. They paid the price so that you could have the freedom to get an education. Don’t ever forget it.”


By the way, this is a true story. And this teacher was awarded Veterans of Foreign Wars Teacher of the Year. She is the daughter of a WWII POW.





(Copyright 2016 Chrisman LLC. All rights reserved. Occasional paid job listings do appear. This report or any portion hereof may not be reprinted, sold or redistributed without the written consent of Rob Chrisman.)


Rob Chrisman