Earlier today, FHFA issued a press release outlining a forbearance program for both Fannie & Freddie. From what I've read, Freddie will extend a 3 month pause on all P&I + reserve which will be repaid over a 12 month installment period.
There are a couple of provisions, with the most glaring being that evictions are prohibited throughout the forbearance period.
Interested to hear what you folks think of this.
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Pair this with the fact that the FOMC is about to purchase Agency CMBS for the first time, per this Commercial Observer article.
https://commercialobserver.com/2020/03/fed-promises-aggressive-measures…
https://www.newyorkfed.org/markets/opolicy/operating_policy_200323
I saw that this morning. Fannie Mae MBS spreads blew out close to a 100% today as liquidity continues to dry up, and that's for government backed paper...
My gut instinct is that this will do little to restore short term confidence. Forbearance will only be a success if LL's are able to recoup 3x rental income as well. I just don't see this being the fix.
So is this a complete forbearance/grace period that shifts the maturity date by 3 months?
Or is this more of a deferral where there is a payment "catch up" and the maturity date remains the same.
Keeps the maturity date the same. The 3 months of P&I that they can defer will be paid back over 12 months, in equal installments.
Futher update to agency world.
Fannie is going to be instituing an interest reserve, up to 12 months of P&I payments for all loans >$6M. On the the top end, for tier 2 product, property will need to perform at a 1.25 DSCR for two quarters before the reserve is distributed.
Crazy times ahead.
So I work for an agency lender. Sounds like this could lead to layoffs? Pretty scared rn.
Stay strong. On the bright side, you're not at a debt fund...
The agencies are going to stay in the market, and deals will need to be financed. Just realize that the status quo sales pitch of income/rent/population growth is going to need to change. This is an opportunity to be an advisor.
Will these current conditions have negative impacts on Fannie/Freddie?
https://www.ft.com/content/575e818e-c35a-462b-8daa-ab784163f604
Yes, question is a matter of degrees.
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