The belt is loosening a bit when it comes to Government-Sponsored Enterprise (GSE’s) Group Lending

(858) 433-0441 scanty@grs-global.com

Steve Canty, Director
GRS | Corteq
(858) 433-0441
scanty@grs-global.com

The GSE belt is loosening a bit. 

In 2015, the GSE’s, Fannie Mae and Freddie Mac, capped the amount of business they can do at $30 billion. This year, the cap started slightly higher than that, at $31 billion. But last year they had an annual cap, so they could only raise or lower it at the end of the year. In 2016, they are doing it quarterly.

So, the GSE’s started at $31 billion, and they took a look at it through the first quarter, and the Federal Housing Finance Agency (FHFA), which controls the amount given, actually increased the cap from $31 billion to $35 billion. With a higher cap, that will give more liquidity to the market, and it’s a good prognostication for the rest of the year.

The problem in 2015 was earlier in the year almost all of the cap was used up in the first half, and that led to a bunch of different headaches, because they had to slow down business in the second half. Now, they are able to adjust it on the fly. Since 2016 started out pretty slow, and with the max at $31 billion, the groups kept the loan rates up relatively high because they went through their maximum so fast last year and did not want to repeat that.

When the FHFA gave them $4 billion more after the first quarter, Freddie responded quickly with a modest decrease in its loan rates, and Fannie will probably follow suit. The lower rates in turn should bring in more business from the borrowers for the GSE’s in the second half of 2016.

The anticipation is that the lending climate this year is going to be better than 2015, because loan rates are expected to lower since the maximum was increased. The nice thing about Fannie and Freddie, and the FHFA, is that they have certain types of loan products that are don’t top out pricewise. The industry expects the groups to do $35 billion each in loans, but uncapped products will probably bring that up more, toward $100 billion total. The uncapped investments include small-balance loans; manufactured housing, by market; assisted living; and income-restricted affordable-housing projects.

Last year, when the cap hit pretty early, there was a shift in multifamily loans towards the non capped deals, and we saw a lot more of those pop up toward the second half of 2015. The trend of more uncapped deals that finished in 2015 continued in the beginning of 2016, except they also added a green initiative this year as part of the unrestricted-cap products. We’ve seen an uptick in that kind of business so far this year.

Overall, we anticipate, the second quarter through the rest of the year will be pretty strong for Fannie and Freddie, based on the cap being raised, and they’re already lowering rates. The GSE’s take a big chunk of the multifamily market, and they’re projecting to do $100 billion in multifamily this year, whereas the whole market is $260 billion.

GRS Group is the most seasoned and experienced firm dealing with Fannie and Freddie loans. The new uncapped green initiative puts GRS Group in a great position to help our clients, as we have created a group to specialize in green loans. GRS Group is ahead of the curve for those looking for due-diligence services in this arena.

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