Multifamily Lending Dips, Shareholders Triumph, and Mortgage Rates Climb

Multifamily Lending Sees Slight Decline in 2022

In 2022, multifamily lenders provided $480.1 billion in new mortgages for apartment buildings with five or more units, marking a 1% decrease from 2021, according to the Mortgage Bankers Association (MBA) annual report. Despite the challenges faced by the lending industries last year, the multifamily lending market remained robust.

A significant portion of the lending activity was driven by banks. Jamie Woodwell, MBA’s head of commercial real estate research, noted, “Multifamily borrowing remained strong in 2022, primarily due to bank lending.” While most capital sources experienced a decline in lending activity, banks almost entirely compensated for this drop.

However, Woodwell also indicated a potential shift in the current year. He mentioned evidence suggesting that banks have become more stringent with their underwriting standards and that borrower demand might be waning.

Depositories accounted for the lion’s share, receiving 42% of the $480.1 billion in new mortgages for larger apartment buildings. The top five multifamily lenders by dollar volume in 2022 were JPMorgan Chase, Wells Fargo, Walker & Dunlop, Berkadia, and Capital One Financial Corp.

The report’s data is a combination of MBA’s findings and information from the U.S. government’s Home Mortgage Disclosure Act (HMDA).

Shareholders of Fannie Mae and Freddie Mac Awarded $612M

A Washington, D.C. jury has ruled that the regulator of Fannie Mae and Freddie Mac had improperly amended stock purchase agreements in 2012. This amendment had allowed the U.S. Treasury to absorb the companies’ net profits. As a result, shareholders of these government-sponsored enterprises were awarded a total of $612.4 million in damages.

The breakdown of the award sees Fannie Mae paying $299.4 million to junior preferred shareholders, while Freddie Mac will pay $281.8 million. An additional $31.4 million will go to owners of Freddie’s common shares.

This verdict in the Berkley v. FHFA case is significant, especially after its dismissal in October due to a hung jury. The core of the plaintiff’s argument was that the FHFA violated shareholders’ contractual rights by relinquishing all their dividends indefinitely.

The controversy began with the 2008 restructuring of the agencies. After a $100 billion bailout from the Treasury, GSE investors claimed that the government anticipated substantial profits from the GSEs. An initial agreement between the FHFA and the Treasury Department was altered in 2012, which led to Fannie Mae and Freddie Mac paying dividends based on their net worth, sidelining private investors.

While this is a victory for shareholders, many anticipate the FHFA to appeal the decision.

Mortgage Rates Rise for Third Week, But Economic Strength Persists

The 30-year fixed mortgage rate has risen for the third week in a row, reaching 6.96%, as reported by Freddie Mac. This increase comes as the financial world anticipates the Consumer Price Index release, following the last FOMC meeting in July. Lawrence Yun of NAR suggests that mortgage rates might have peaked and could soon decline. A year ago, the 30-year fixed-rate mortgage stood at 5.22%, while the current 15-year fixed-rate mortgage has climbed to 6.34%.

Various mortgage rate indices also reported higher rates. For instance, HousingWire’s Mortgage Rates Center indicated Optimal Blue’s 30-year fixed rate at 6.99%, and Mortgage News Daily reported a rate of 7.05%.

Sam Khater, Freddie Mac’s chief economist, commented that while rates nearing 7% could impact housing affordability, the strong economy characterized by low unemployment and robust wage growth traditionally maintains solid purchase demand.

The economy remains favorable for the real estate sector. George Ratiu of Keeping Current Matters noted that despite rising prices and mortgage rates above 6.5% since May, the demand for homes remains high. The recent surge in new home sales indicates buyers are exploring new construction options.

Historically, mortgage rates tend to decrease once inflation subsides, usually after a six-to-eight-month period. If inflation remains consistent, rates might decrease to around 6% by Fall, as predicted by Ratiu.

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