The Dos and Don'ts of Multifamily Housing Financing.Multifamily housing financing is becoming more complex. A secondary market for multifamily mortgages and other investment house programs are broadening broad·en tr. & intr.v. broad·ened, broad·en·ing, broad·ens To make or become broad or broader. broad the pool of available funds for financing, including equity and debt. Derivative instruments Derivative instruments Contracts such as options and futures whose price is derived from the price of an underlying financial asset. for multifamily mortgages will develop and help expand multifamily financing, as they have in the homeownership market. Real estate investment trust (REIT REIT See: Real Estate Investment Trust REIT See real estate investment trust (REIT). ) activity in multifamily housing revived re·vive v. re·vived, re·viv·ing, re·vives v.tr. 1. To bring back to life or consciousness; resuscitate. 2. To impart new health, vigor, or spirit to. 3. in the 1990s. The Internet Internet Publicly accessible computer network connecting many smaller networks from around the world. It grew out of a U.S. Defense Department program called ARPANET (Advanced Research Projects Agency Network), established in 1969 with connections between computers at the revolution will increase the ease of accessing financing. One way to see some of the change in multifamily financing is through data on multifamily mortgages, such as the accompanying ac·com·pa·ny v. ac·com·pa·nied, ac·com·pa·ny·ing, ac·com·pa·nies v.tr. 1. To be or go with as a companion. 2. table, which gives the multifamily mortgages, by type of holder, annually for the 1990s. The Federal Reserve Board (FED) as part of its Flow of Funds Flow of funds In the context of municipal bonds, refers to the statement displaying the priorities by which municipal revenue will be applied to the debt. In the context of mutual funds, refers to the movement of money into or out of a mutual funds or between or among tracking system produces it. Flow of funds data measures the level and change of financial assets Financial assets Claims on real assets. in the economy. Multifamily in the FED data series is defined as properties with five or more units, the definition used for apartments in most other data series. Mortgage debt outstanding in the U.S. at the end of last year totaled $372.2 billion. This is up more than $106 billion, or 40 percent, from 1994. A bottoming out of mortgage debt outstanding for multifamily properties occurred in 1994 following the end of the multifamily housing recession. Multifamily mortgage debt outstanding peaked at $285.9 billion in 1989, and then dropped about $20 billion over the next five years. The decline was driven by the wide scale defaults brought on by the overbuilding of apartment homes in the 1980s. There were significant changes in the mix of the holders of multifamily mortgage debt in the 1990s. A major share of the changes is the result of the growth in securitization Securitization The process of creating a financial instrument by combining other financial assets and then marketing them to investors. Notes: Mortgage backed securities are a perfect example of securitization. May also be spelled as "securitisation. of multifamily mortgages and the revival revival n. 1) requesting a court to reinstate the force of an old judgment. 2) reinstating a contract or debt by a new agreement after the right to demand performance or collect has expired under the statute of limitations (the time to sue). of REITs. Commercial banks moved to the top of the list of holders of multifamily mortgages last year. Their holdings rose to $66 billion, versus $59.4 billion for savings institutions, the historical leader in long-term Long-term Three or more years. In the context of accounting, more than 1 year. long-term 1. Of or relating to a gain or loss in the value of a security that has been held over a specific length of time. Compare short-term. multifamily mortgages. Savings institution holdings declined sharply from the peak of $107.1 billion in 1987. Commercial banks took the lead because a large number of savings institutions were acquired or converted to savings institutions in the 1990s. Savings institutions did increase their holdings of multifamily mortgages slightly last year, but the $2.4 billion increase was a small fraction of the $13.1 billion increase of commercial banks. Many of the remaining savings institutions were reluctant to finance multifamily properties until recently. They experienced the troubled multifamily markets of the late 1980s and early 1990s. Growing securitization of multifamily market financing can be observed in the sharp increases in asset-backed securities Asset-backed security A security that is collateralized by loans, leases, receivables, or installment contracts on personal property, not real estate. asset-backed security A debt security collateralized by specific assets. (ABS (Automatic Backup System) See backup program. ) issuers holdings of mortgage debt, federally-related mortgage pools and government-sponsored enterprises from 1994-99. They combined for $121.9 billion in multifamily mortgages last year, a 140 percent increase over the $50.9 billion level in 1994. ABS issuers are private sector securitizers of debt, and don't don't 1. Contraction of do not. 2. Nonstandard Contraction of does not. n. A statement of what should not be done: a list of the dos and don'ts. include Fannie Mae Fannie Mae: see Federal National Mortgage Association. and Freddie Mac Freddie Mac: see Federal Home Loan Mortgage Corporation. . Outstanding ABS multifamily mortgages jumped 321 percent, from $9.9 billion in 1994 to $41.7 billion last year. The federally-related mortgage pools are the securitized securitized Of, related to, or being debt securities that are secured with assets. For example, mortgage purchase bonds are secured by mortgages that have been purchased with the bond issue's proceeds. mortgage issues of entities that include Fannie Mae and Freddie Mac, among others. Federally-related mortgage pools grew by 157 percent to $57.5 billion at the end of 1999, from $22.4 billion in 1994. Fannie Mae and Freddie Mac are also part of the Government-Sponsored Enterprises category. These total holdings were $22.7 billion last year. REITs became a significant factor in the multifamily market, but not as holders of mortgage debt. They held only $1.6 billion of multifamily mortgage debt last year, down from $2.1 billion in 1998. REITs fund their real estate acquisitions through equity raised in the capital markets and through mortgage debt. It is estimated that REITs own about $52 billion of multifamily real estate and that about half of it is financed with mortgage debt. A significant number of REITs do not use debt financing Debt Financing When a firm raises money for working capital or capital expenditures by selling bonds, bills, or notes to individual and/or institutional investors. In return for lending the money, the individuals or institutions become creditors and receive a promise to repay . REITs multifamily mortgage debt is given under Liabilities component of data. It rose more than 300 percent, from $6.2 billion in 1994 to $25.3 billion last year. REITs went through a major adjustment last year and their net increase in multifamily investment dropped to $1.6 billion from over $11 billion in each of the two previous years. Life insurance companies increased their multifamily mortgage holding to $32.6 billion last year, a 17 percent increase from 1994. If mortgage-backed securities Mortgage-backed securities (MSBs) Securities backed by a pool of mortgage loans. were added, the impact on multifamily mortgages would probably be significantly higher, Most other holders of multifamily mortgage debt are relatively small. This too, as with insurance companies, can be misleading in regard to the importance of some of them in the multifamily sector. Mortgage companies, for example, held $5.3 billion in multifamily mortgages, but they were significant originators of multifamily mortgages that became securitized. Presenting data on multifamily financing and mortgages is complex. It will become more so as the technological revolution continues. The best part about this revolution is that it will make multifamily financing more efficient and competitive.
Amount outstanding at end of year
1991 1992 1993 1994
Total Assets 281.7 269.3 266.2 265.8
Commercial banking 35.1 36.2 37.0 37.9
Savings institutions 79.9 69.8 67.4 64.3
Federally related mortgage pools 26.1 23.8 22.5 22.4
State and local governments 41.7 42.4 42.8 43.5
ABS issuers (Asset Backed 3.2 6.6 8.4 9.9
Securities)
Life insurance companies 29.3 27.2 27.5 27.8
Government-sponsored enterprises 14.2 15.8 17.5 18.4
Federal government 31.9 27.6 24.6 22.0
Nonfarm noncorporate business 8.4 8.4 7.0 7.0
State and local govt. retirement 4.8 4.2 4.1 4.3
funds
Mortgage companies 2.7 3.0 3.1 3.1
Finance companies 0.0 0.0 0.0 0.0
Nonfinancial corporate business 0.6 0.4 0.5 0.9
REITs 2.2 2.2 1.9 2.1
Private pension funds 0.9 0.7 0.7 0.9
Household sector 0.8 1.1 1.4 1.3
Total liabilities 281.7 269.3 266.2 265.8
Nonfinancial corporate business 18.8 19.3 19.9 20.5
Nonfarm noncorporate business 261.3 248.2 243.4 239.1
REITs 1.6 1.8 3.0 6.2
1995 1996 1997 1998
Total Assets 273.4 289.2 302.5 329.5
Commercial banking 42.5 45.5 49.7 52.9
Savings institutions 62.0 61.6 59.5 57.0
Federally related mortgage pools 26.9 32.5 37.8 48.3
State and local governments 44.1 45.9 46.5 47.4
ABS issuers (Asset Backed 12.0 16.1 21.2 33.5
Securities)
Life insurance companies 28.7 30.8 30.4 31.5
Government-sponsored enterprises 19.0 18.6 17.3 18.1
Federal government 17.3 14.8 13.9 13.6
Nonfarm noncorporate business 7.9 7.0 7.0 7.0
State and local govt. retirement 4.5 4.7 5.0 5.2
funds
Mortgage companies 4.2 4.1 5.2 5.3
Finance companies 0.0 3.1 2.9 2.7
Nonfinancial corporate business 0.1 0.8 1.4 2.0
REITs 1.6 1.2 2.1 2.1
Private pension funds 1.0 1.1 1.2 1.4
Household sector 1.6 1.5 1.5 1.5
Total liabilities 273.4 289.2 302.5 329.5
Nonfinancial corporate business 21.1 21.7 22.5 23.5
Nonfarm noncorporate business 244.4 256.9 264.5 282.4
REITs 7.9 10.5 15.4 23.6
Change 1994-99
1999 $'s %
Total Assets 372.2 106.4 40.0%
Commercial banking 66.0 28.1 74.1%
Savings institutions 59.4 -4.9 -7.6%
Federally related mortgage pools 57.5 35.1 156.7%
State and local governments 48.3 4.8 11.0%
ABS issuers (Asset Backed 41.7 31.8 321.2%
Securities)
Life insurance companies 32.6 4.8 17.3%
Government-sponsored enterprises 22.7 4.3 23.4%
Federal government 13.6 -8.4 -38.2%
Nonfarm noncorporate business 7.3 0.3 4.3%
State and local govt. retirement 5.5 1.2 27.9%
funds
Mortgage companies 5.3 2.2 71.0%
Finance companies 5.1 5.1 nm
Nonfinancial corporate business 2.6 1.7 188.9%
REITs 1.6 -0.5 -23.8%
Private pension funds 1.5 0.6 66.7%
Household sector 1.4 0.1 7.7%
Total liabilities 372.2 106.4 40.0%
Nonfinancial corporate business 24.7 4.2 20.5%
Nonfarm noncorporate business 322.1 83.0 34.7%
REITs 25.3 19.1 308.1%
Source: Federal Reserve Board, Regis (REmote Graphics InStruction) A graphics language from Digital used on graphics terminals and first introduced on the PDP-11. J Sheehan People whose surname is or was Sheehan include:
Robert Robert, Henry Martyn 1837-1923. American army engineer and parliamentary authority. He designed the defenses for Washington, D.C., during the Civil War and later wrote Robert's Rules of Order (1876). Noun 1. J. Sheehan Mr. Sheehan is president of Regis J. Sheehan Data and Forecasting Service in McLean McLean, city (1990 pop. 38,168), Fairfax co., N Va., a suburb of Washington, D.C. Manufacturing includes foods, satellite components, and computer and telecommunications equipment. , Va., and serves as NAA's consulting economist This article is about the profession. For the news publication, see The Economist. An economist is an expert in the social science of economics.[1] . |
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