Fannie Mae’s Blackstone Deal

This is an article that appeared at Mortgage News Daily:

It seemed just an aside in the National Association of Realtors press release regarding January existing home sales. NAR President William E. Brown, took a shot at the GSE’s saying first, “Supply and demand imbalances continue to be burdensome in many markets, and now Fannie Mae is supporting a Wall Street firm’s investment in single-family rentals.” Then widening his comment to include Freddie Mac, said, “Instead, the GSEs should lower overly burdensome fees and help qualified borrowers become homeowners.”

It turns out there is a little more to the story.

Brown was referring to Fannie Mae’s recent decision to back a $1 billion mortgage given to Invitation Homes. The company, a subsidiary of private equity firm Blackstone, purchased an estimated 48,000 foreclosed single family homes subsequent to the housing crash. They will service as collateral for the Wells Fargo loan. Fannie Mae termed the issuance of the guaranty a “pilot program.”

The GSE role in the rental market has historically focused on multi-family properties or to a lesser extent, on single-family properties owned by smaller investors, defined as those owning ten or fewer homes. Fannie Mae has typically limited financing to small investors at 10 properties and Freddie Mac to six. Freddie Mac has indicated it might consider a program similar to Fannie’s pilot.

The Urban Institute strongly endorsed Fannie Mae’s venture into the institutional single-family market, but there has been significant blowback from other quarters. That brings us back to Brown’s comment in the existing home sales report. It wasn’t a throw-away line.

On January 31 Brown wrote a letter on behalf of NAR to Mel Watt, director of the Federal Housing Finance Agency, regulator and conservator of the GSEs. The letter said in part, “Rather than focusing on allowing well-qualified Americans to build wealth through affordable mortgage options, Fannie Mae is actively financing large institutions to compete with them. These investors do not expand the affordable housing stock. Rather, in this limited market they drive up the price of rents and remove affordable inventory from the hands of American homeowners.”

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