May 15, 2023
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NMHC and NAA File Comment Letter on Enterprise Regulatory Capital Framework
NMHC and NAA filed a comment letter with FHFA on proposed changes to the Enterprise Regulatory Capital Framework affecting Fannie Mae and Freddie Mac. This proposed change is the latest of several that the regulator has made since finalizing the ERCF in February 2021. This positive change acknowledged in our letter would lower the capital charge on certain multifamily loans that have government subsidies described in the proposed rule. NMHC and NAA also suggested that FHFA evaluate and make other changes suggested in past comment letters filed on ERCF.
What This Means: The multifamily marketplace relies on a variety of debt capital sources to fund their investment activities and is negatively impacted if these sources are disrupted. Fannie Mae and Freddie Mac are active and present during this disruption and play a meaningful countercyclical role.
Why This is Critical for Our Industry: NMHC and NAA have provided comments to FHFA during the formation of the ERCF. Many of our suggestions have been incorporated in the original final rule and its subsequent proposed changes. While these changes are positive, there is more work that needs to be done in order to not unfairly burden multifamily loans with capital requirements that do not accurately reflect its risk.
NMHC's Viewpoint: FHFA has shown a continued commitment to evaluating the ERCF and making adjustments as needed. NMHC will continue to stress that additional changes should be considered in order to accurately reflect multifamily performance.
Apr. 13, 2023
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NMHC Discusses Lending Slowdown with FHFA
The leaders of NMHC’s Finance Committee met with FHFA to discuss the current state of the multifamily debt markets. The Committee explained the disruptions in the capital markets due to higher interest rates, bank stress and potential problems in CRE that are causing a slowdown in lending and investing activity.
What This Means: The multifamily marketplace relies on a variety of debt capital sources to fund their investment activities and is negatively impacted if these sources are disrupted. Fannie Mae and Freddie Mac are active and present during this disruption and play a meaningful countercyclical role.
Why This is Critical for Our Industry: FHFA relies on input from NMHC and its members to establish the annual purchase caps for the Enterprises and to make mid-year corrections, as needed. The purchase caps dictate how much capital the Enterprises can provide to the multifamily debt market needs. Ongoing capital market volatility and disruption increase the importance of the critical role the Enterprises serve in providing a constant source of debt capital.
NMHC's Viewpoint: FHFA has shown a continued commitment to working with NMHC to establish rationale purchase caps and to make annual and quarterly adjustments as needed.
March 29, 2023
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Real Estate Industry Weighs in on Debt Ceiling
On March 29, NMHC joined in a coalition of 14 real estate trade associations in submitting a letter to the leaders of the House and Senate that they take action to raise the statutory debt limit of the Federal government. This action is critical to the stability of the financial markets that Congress acts to raise the debt ceiling. Without this action, the U.S. could default on its global debt obligations and permanently damage the financial markets, including the $10.3 trillion in mortgage debt backed by the federal government.
NMHC's Viewpoint: NMHC will continue to engage members of Congress to ensure they understand the critical impact to the multifamily industry and the entire financial market should they fail to reach agreement on raising the debt ceiling.
What’s Next: Raising the debt limit can only be achieved through Congressional Action. Members of each chamber are working with Treasury and the Administration to work through outstanding issues that each party believes they must obtain in order to approve the increase. Although there is precedence for pushing the approval to the last minute, the U.S. has never defaulted on its obligations.
Read our comment letter to learn more about our specific asks.
Jan. 18, 2023
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January Quarterly Survey of Apartment Markets Finds Transactions Pull Back Due to Higher Interest Rates
Apartment market conditions weakened in the NMHC Quarterly Survey of Apartment Market Conditions for January 2023, as the Market Tightness (14), Sales Volume (10), Equity Financing (20), and Debt Financing (25) indexes all came in well below the breakeven level (50).
What This Means: The Fed’s rate hikes have translated to a higher cost of debt financing, causing buyers to seek a higher rate of return. With sellers unwilling to budge much on pricing, apartment transaction volume has largely dried up.
Diving Deeper:
- The Equity Financing Index reading of 20 marked the fourth consecutive quarter in which equity financing became less available. Nearly two-thirds (63%) of respondents reported equity financing to be less available than three months ago, while 27% of respondents believed availability to be unchanged. Only 2% of respondents reported an increase in the availability of equity financing.
- The Debt Financing Index reading of 25 indicated the sixth straight quarter in which debt financing became less available. Sixty percent of respondents reported that conditions have worsened for debt financing, while a quarter (25%) thought that conditions were unchanged. Unlike in October, some respondents (9%) reported that now is a better time to borrow than three months ago.
Find more key findings from the NMHC Quarterly Survey of Apartment Market Conditions.
