Government-Sponsored Rental-Prise?

Freddie Mac BHFreddie Mac might be following in Fannie Mae’s footsteps, according to a recently published New York Times article, and get a hand in the single-family home-rental market, now that the Federal Housing Finance Agency (FHFA) has given the Enterprise the go-ahead to shop around.

According to the piece, the bank wants to supply up to $1 billion for affordable housing rentals to mid-sized landlords, with the possibility of bringing in nonprofits as well. Affordability is the Enterprise’s main goal, Freddie Mac VP David D. Leopold said in a statement.

Freddie’s proposed deal would be much different than Fannie Mae’s, which reached a $1 billion financing deal with Invitation Homes, one of the largest private-equity-backed landlords in the country. The firm holds 50,000 single-family rental-homes in 13 major markets, and had an initial public offering netting $1.7 billion around the time of signing.

There’s still plenty of rental homes to go around, though. The New York Times reports that there are 17 million homes rented, a figure that has grown from 11 million in 2007. Freddie Mac would like to find itself somewhere in the middle. From the article:

The vast majority of rentals are still managed by mom-and-pop operators who own a small number of homes. And Fannie Mae and Freddie Mac have long provided financing to small investors. But financing has been hard to come by for nonprofit housing groups and midsize investor landlords who have had to rely mainly on private-equity-backed firms for financing.

The goal of the move would be to add some stability to mid-sized landlords by guaranteeing loans, thereby encouraging more traditional lenders to get into this underrepresented portion of the single-family rental market. The Senate Committee on Banking, Housing, and Urban Affairs has recently been calling for reforms to the government-sponsored Enterprises, and the move to single-family rental homes could be a step in that direction when considering the future.

The FHFA will still have to approve of any financing deal Freddie Mac comes up with, though, and has only approved of Freddie and Fannie’s move to the rental market in limited quantities. The agency had previously denied Freddie Mac in 2012, when the Enterprise wanted to finance buyers of foreclosed homes, citing concerns that low cost loans would hurt the banks and encourage home flipping.

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