Fannie Mae’s Seniors Housing Portfolio Gives Outstanding Performance in Q3

Fannie Mae’s asking for a $7.8 billion bailout as its single-family portfolio continues to struggle with growing default rates, but its seniors housing loan performance is doing just fine with no seriously delinquent loans or contributions to credit loss.

The seniors housing asset class makes up 8% of the Multifamily Guarantee Book of Business, with about $14.4 billion in unpaid principal balance. None of the loans are seriously delinquent, and the asset class didn’t contribute anything to the 2011 book’s credit losses.

Meanwhile, the conventional/co-op asset class is largest in the multifamily book at 89% of total loans and with $169.7 billion in unpaid principal balance. This portion has 0.64% of its loans classified as “seriously delinquent,” and accounts for 95% of the 2010 Multifamily book’s year-to-date credit losses.

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Manufactured housing loans account for 2% of the overall book and $4.5 billion of unpaid principal balance, with 0.06% seriously delinquent. Student housing loans, at 1% of the multifamily portfolio, had no delinquent loans but accounted for 5% of year-to-date multifamily credit losses.

The seniors housing loans’ strong performance can be attributed to the company’s business methods.

“We transact and approve our product capability with a specific number of lenders, and that’s where DUS (delegated underwriting and servicing) comes in,” said Chris Honn, director of Fannie Mae’s seniors housing group. “In seniors housing, unlike other real estate products we have at Fannie Mae, it’s really an operating business which just happens to take place inside of high-quality, purpose-built real estate.”

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He explained that the company has, over time, created underwriting standards to which their underwriters must adhere, and their lenders partners that are approved for seniors housing must “commit to remaining an expert in the business,” and continue to originate and bring the company high-quality business.

“That’s been a critical component to our success over time,” he said.

And, as the demand for seniors housing continues to grow with thousands of the baby boomer generation reaching retirement age each day, Fannie Mae remains committed to supporting the market and continuing to service this product.

The company hopes to maintain its stellar seniors housing performance.

“If we continue to remain focused on our business plan and focused with our lender partners doing high-quality business, understanding what our borrowers need from us and from their customers, the residents of senior housing, then we hope to deliver continued successful results,” said Honn.

View Fannie Mae’s 2011 Third Quarter Credit Supplement.

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