Many people in my industry have been campaigning for Fannie/Freddie to lift the limits on how many investor loans an individual can have(a well intentioned but very short-sighted reaction to the housing crash). Allowing more investors to provide affordable rentals in this market is going to be a key in reducing the unprecedented housing supply that is dragging down the housing market. If I've talked to you in person, you're probably very sick of me talking about that.
Well, there is another potential relaxation of underwriting standards being considered that is
very exiting for urban development in particular. This is particularly attractive for Jacksonville b/c if the 2030 Mobility Plan passes, there will be multiple incentives for developers to focus on dense infill(particularly in the urban neighborhoods) if Fannie Mae adopts these changes. Think about how many abandoned mixed use buildings in Springfield(I can think of about a dozen off the top of my head) will be eligible for financing under these new proposed guidelines... and think of how many empty surface lots downtown would now have more attractive financing options for mixed use projects(particularly smaller-scaled projects, the singles Jim Baily likes to talk about) if these new guidelines come to pass???
As someone that lives and breathes these types of transactions everyday, this could be a big deal, imho.
http://www.cnu.org/node/3872 (http://www.cnu.org/node/3872)
QuoteCNU is excited to announce a major step in efforts to relax Fannie Mae and Freddie Mac underwriting rules
CNU is excited to announce a major step in efforts to relax Fannie Mae and Freddie Mac underwriting rules. In a partnership with the National Town Builders Association (NTBA) and the National Association of Home Builders (NAHB), CNU has encouraged the NAHB board to push Fannie and Freddie to raise their minimum threshold for the amount of commercial space in mixed-use developments from 25% to 45%. The standard also applies to mortgages guaranteed by HUD.
In December, John Norquist, President and CEO of CNU, met wtih Jerry Howard, president of NAHB, to encourage him to support this effort. Earlier this month at the NAHB winter Board of Directors meeting, Frank Starkey of NBTA, and William Tuyn, who is on the NAHB board and is a longtime CNU member, worked successfully with four committees to authorize the NAHB lobbyists to help reform Fannie, Freddie and HUD.
This is tremendous news for developers and designers of urban infill, mixed-use and Main Street devleopment types, as reforms will provide federally-backed loan gurantees for a sector that has been overlooked for decades. CNU's John Norquist is pleased with the results so far. "CNU looks forward to continued efforts to work with NAHB and NBTA to remove obstacles in the way of good urban development."
We at CNU would like to thank William Tuyn, Frank Starkey, and Jerry Howard and the NAHB board for their support to-date. These and future efforts will help provide critical financial backing that will improve the long-term health of our cities.
A little bit more to help you understand:
QuoteIn the last two years Fannie Mae and Freddie Mac, the two large federally chartered secondary mortgage agencies, have received, fairly or unfairly, blame for overheating the housing market and for helping spur the Great Recession. Whether Fannie and Freddie should be blamed for the recession, there is little question that Federal mortgage agencies hold great influence over the housing market. On the positive side Fannie and Freddie are often credited with creating and popularizing the low interest long-term mortgage. This helped many middle class Americans become homeowners. However, from the outset, these agencies restricted government backed mortgage market activity to housing built in noncommercial areas. Fannie Mae prohibits eligibility for any project that is more than 20% non residential. Freddie allows up to 25% non residential. HUD's capital program for multifamily housing, 221 d (4), also restricts non residential to 20% of imputed rent. This has had a distorting effect on building types and development patterns. Low- to mid-rise buildings with retail on the first floor and apartments or condominiums above are disadvantaged under the Fannie, Freddie and 221 d (4) limits. Before these regulations, low-mid rise mixed use buildings were common. In fact, you can see them across America on Main Streets in older towns and suburbs. These places remain popular, holding strong real estate value. Yet, largely because of the distorting effect of Fannie/Freddie limits on mixed-use residential, development and redevelopment is substantially excluded from housing finance markets which are dominated by Fannie/Freddie.
The Congress for the New Urbanism and the National Town Builders Association propose that current restrictions on mixed-use buildings be eliminated, or raised to allow at least 50% of a project to be non-residential and still allow the residential portion of the project to be eligible for the Fannie/Freddie secondary mortgage market or the 221 d (4) capital program. This change would allow market forces to better determine characteristics of development rather than federal mandates. It would allow the market to respond to recent consumer preferences for mixed use neighborhoods, as most recently reported in the Urban Land Institute/Pricewaterhouse Coopers Emerging Trends in Real Estate 2011. Government generated regulations that suppress development that responds to consumer demand can negatively effect growth and recovery. CNU and NTBA's proposal is to remove or substantially ease these restrictions.
This does sound like good news. I look forward to learning more about it.