Two ways to improve the 223 (f) program that would really extend its usage and help the residents the loan intends to serve
When I left the RTC in 1996 to go back into FHA Multifamily lending, one of my guideposts was Proverbs 19:17, which reads: “He who helps the poor lends to the Lord and He pays wonderful interest on His loans.” While I have financed my share of high-end apartment properties, my greatest satisfaction in this business is helping to find ways to help less fortunate people live their lives a little better. While I can’t help them make more money, I can, through FHA, help ensure their homes are working right, are insulated and provide the least headache-inducing home environment possible, at affordable rent
I believe the toughest job in the United States is that of a single or unmarried mother of several children struggling with daycare, a low paying job, uncertain child support and an uncertain quality of rental housing. One of those we FHA Lenders can do something about.
Today the Jobs report stated that 148,000 non-farms jobs were added in September when the consensus expectation was 185,000 jobs were to be added. This gap has led the 10 year Treasury yields to drop from 2.60% to 2.52%, the lowest they have been since mid-July.
So what does that mean for FHA Multifamily rates? As I said in an earlier blog post, two things are keeping rates high.
First, there are a lot of REMICs that are still underwater, needing the high interest rates of new securities to leaven the entire REMIC so as to increase the weighted average coupon from earlier purchases. This hangover continues. The security buyers are trying to hold investor coupons above 4% so as to be able to curtail losses on those underwater loans bought before the Bernanke pronouncements in May. (more…)
In the last month and a half, interest rates have spiked, stabilized and come down some. The question is, why haven’t FHA Multifamily rates come down more? This brings up how the markets work and how the Fed can raise rates without raising rates themselves. (more…)
Yesterday Chairman Ben Bernanke announced that the U.S. economy is improving and the unemployment rate should accelerate downwards towards a 6.5% level this year. This benchmark is important as the timetable when the Federal government will begin tapering its purchased of $85 Billion per month in government securities, which has been backing about 90% of the residential mortgages being offered this year.
The Fed says it will keep buying $85 billion a month in bonds until the outlook for the job market improves substantially. It’s maintaining its plan to keep short-term rates at record lows at least until unemployment reaches 6.5%, or inflation goes to 2%, which is not likely to happen.
You have to hand it to the Fed — they can raise interest rates without tapering and without raising rates themselves.
How much did our rates go up? Well, it appears to be somewhere between 60-70 bps initially. I saw quotes today at 3.85% for refinances and 4.15% for new construction. (more…)
With the election over the news turns to how Washington will resolve the debt ceiling, the Bush era tax cuts, our looming federal debt and the draconian sword of the Sequester, which looms to potentially cut fully a third from the Federal Budget, including Defense.
This is high drama, as ideology is tested against the realities of needing more money. A new Congress, perhaps even more divided than the last one, will be sworn in, and while there is talk of a down payment, say $80 Billion on the debt in exchange for a 6 month delay in resolving the issues, posturing seems to be the initial response in what will prove to be an ugly process. (more…)
While the final numbers are not yet in on the FHA Apartment Loan financings for fiscal year 2012, through 11 months, the results are as follows:
Firm Commitments: 2,073 versus 1,669 for FY 2011
221 (d) 4 Apartment loans (New Construction and Substantial Rehabilitation): 190 versus 216 for FY 2011
223 (f) Apartment loans (Purchase and Refinance): 1,875 versus 1,444 for FY 2011 (more…)
Over the last two years, Ben Bernanke has provided comfort to the mortgage market and real estate owners regarding the low, sustained interest rates we could count on, first through 2013 and now into 2014.
My cynicism at first was heightened. I kept thinking that sometime after the 2012 elections, we would be receiving the news on the Wednesday or Thursday after election Tuesday that rates were moving north. (more…)
A couple of years ago, a developer went into an FHA office and pitched a deal to the staff. This deal had the American Flag all over it-affordable, public good, a novel approach to handling foreclosures-something you would want to sing God Bless America over. The staff applauded his initiative and encouraged him to the extent they could, saying something like, “this is the kind of deal we should be doing”. Nothing formal took place, just a happy meeting. Nothing was in writing.
3 months later and the process had changed. These type deals were not even on FHA’s radar and the requirements had changed. No big deal except the developer, in the glow of the meeting, had spent several hundred thousand dollars in due diligence on a program FHA could no longer deliver. (more…)
How are FHA and Al Capone the same? Well, let me share a story…
One night in the 1920s, Al Capone went to an Italian restaurant in Cicero, Illinois. The Capone entourage sat down, the waiter came up to the table to get the drink order and as he was leaving, Al Capone slipped the waiter a $100 bill, saying “take good care of us”.
Five, Ten, Fifteen minutes went past and the waiter hadn’t returned. Al went back into the kitchen and said, “hey, where’s my waiter”? One of the help said “He came back here holding a $100 bill, and said ‘I quit this lousy job’ and walked out the back door”.
The Answer: Neither Al Capone nor FHA wants the person they are doing business with to get the benefit of the bargain before they get their bargained-for value. (more…)
If you are considering acquiring or refinancing an existing property with some age on it, you might be in the market for an FHA 223 (f) loan. These loans offer fixed rate, assumable, non-recourse financing for up to 35 years. But to protect themselves and the residents from the owner not being able to make capital improvements over time, the loan establishes an initial deposit to a replacement reserve and an ongoing contribution to the replacement reserve. (more…)