With the recent government take over of Fannie Mae and Freddie Mac, many people are proclaiming that this may be the first step towards setting the housing market back on the right course. Whether you agree with this or not, its important to realize that this will provide some additional support for the senior housing market in the long term. As liquidity has dried up for any type of real estate assets (including senior housing), Fannie and Freddie can provide more liquidity for these assets supported by the full faith and credit of the United States government. Both companies charter’s call for providing liquidity in the capital markets to provide programs for affordable housing, both home ownership and with rental property. Each company has specific employees and departments that deal directly and indirectly with senior housing and issues various mortgage backed securities (MBS) for both multi-family properties and various other types of senior financing. While Fannie and Freddie are in the conservatorship period, can we expect more or less action from these groups for senior housing?
This is from a Fannie Mae press release in July 2008:
“In addition, Fannie Mae plans to build on its market leadership in the Seniors Housing permanent debt market despite declining sales of seniors housing properties from the record pace of 2006 and 2007. Credit conditions have made investing in seniors housing in 2008 more challenging. The company provided over $1 billion in financing for Seniors Housing in the first half of 2008, and has increased its staff to help serve more borrowers and meet a multi-billion production goal for the year. “
Most likely, the senior housing market will see little immediate change from these institutions with the exception possibly being the elimination or substantial reductions in the amounts of both enterprises’s charitable giving and lobbying. Another immediate change is that Fannie Mae is discontinuing their reverse mortgage product at the end of the year (more on that separately). Will the multi-family programs that Fannie Mae offers change? Un-likley. The challenge will be from the downstream seller /servicers (Banks, S&Ls, Finance Companies) to continue to originate Fannie/Freddie eligible products at their local institutions and ultimately sell them to Fannie or Freddie. Many media outlets are touting lower interest rates for conventional mortgages and the muli-family housing market may see some lower rates over time but it’s unlikely to see the same magnitude of lower as the residential market.