Skip to main content

Moody's Sees Finance Reform Provisions Negatively Impacting Home Prices

Apr 16, 2014

Provisions in the comprehensive housing finance reform bill introduced by U.S. Sens. Tim Johnson and Mike Crapo will modestly dampen prices of multifamily properties and increase refinance risk, according to a new report by Moody’s Investors Service, Proposed Housing Finance Reform Will Be A Moderate Credit Negative for Multi-Family CMBS. The Johnson-Crapo bill proposes replacing Fannie Mae and Freddie Mac, government-sponsored enterprises (GSEs) responsible for securitizing single- and multi-family home loans, with a new and independent federal agency called the Federal Mortgage Insurance Corporation (FMIC). The bill also proposes creating a multi-family office within the FMIC that would insure mortgage-backed securities to facilitate the availability of multi-family loans. “If this bill becomes law, higher loan coupons on the FMIC-backed share of debt will exert downward pressure on multifamily property prices and increase refinance risk, but the impact would be moderate,” said Tad Philipp, Moody’s director of Commercial Real Estate Research. “U.S. government backing for multi-family debt that had been implicit and free would become explicit and bear a guarantee fee. While GSE-backed multi-family debt often had pricing advantages relative to private market debt, loan spreads on FMIC-backed debt would more closely align with those of private market originators.” Multi-family properties are a key component of US housing stock. Because Fannie Mae and Freddie Mac are the largest source of multi-family debt capital, the ultimate implementation of GSE reform and the smoothness of the transition are thus critical credit considerations, according to Moody’s.
About the author
Published
Apr 16, 2014
Fed Rate Could Be Down To 4.6% By Year's End

Inflation must hit its 2% goal for Fed to reduce rates.

New Compliance Requirements Add Challenges

Latest changes arrive at an already disruptive time in the mortgage industry

Changes Coming For Investment Properties

Using leases to qualify will require Proof

FCC Adopts New Rules To Close The 'Lead Generator Loophole'

Mortgage lead providers respond, saying this will "wipe out" several small and mid-tier businesses

Trade Associations & Lenders Stand Behind Trigger Leads Bill

Major trade associations like The MBA, NAMB, and BAC, urge action on S. 3502.

Supply And Demand Are Still Alive And Well

Treasury auctions may face weaker demand but they’re still getting done