Freddie Rental Matrix: Fill & Download for Free

To understand why there is a pricing difference between lenders, it’s important to know the fundamental business model of the mortgage industry.When you apply for a mortgage, whether from a commercial bank or “non-depository” mortgage banker, they underwrite, approve and fund the loan knowing that they will sell it to an investor as soon as possible—within days after funding. Most loans ultimately are sold to one of three investors: Fannie Mae, Freddie Mac (conventional loans) or Ginnie Mae (FHA and VA loans). The investors buy the loans for more than the “note rate”—the interest rate the borrower pays. The investor will receive its return over a period of years, as the borrower repays the principal and interest.The money the lender gave the borrower came from a specialized line of credit called a warehouse line. The investor buys the loan at a premium—let’s say for our example that they pay $104,000 for a loan of $100,000.The lender first pays off the warehouse line, freeing it up to make another loan. They pay the origination costs (the loan officer’s commission) and overhead (rent, salaries, etc.). What’s left is their profit.All lenders sell their loans to the investors on the same terms. In other words, if my company can sell a loan to Fannie Mae for $104,000 today, another company won’t sell a loan on the same terms for, say, $106,000.The reason it’s important to know all this is to know first of all that there is not a vast margin when the lender sells the loan to the investor. That means that the difference rate between lenders has to do with the amount of profit they expect to earn on the loans they originate, fund and sell.To put the numbers into perspective, a difference of .25% in rate means a difference in the price the investor will pay of about 1% of the loan amount.Some lenders may advertise rates that are significantly lower than others because they are charging discount points. If the “par” rate today for a 30-year fixed rate mortgage is, say, 4.5%—that means the borrower pays no points—the same loan where the borrower pays 1% of the loan amount would be closer to 4.25%. Although lenders are required by law to disclose the Annual Percentage Rate (APR) and that figure takes discount points into account, few consumers understand or pay attention to this number.There are on-line lenders whose advertised rates may be lower than those available from brick-and-mortar lenders. They can do this because their “loan consultants” are basically call center operators whose primary responsibility is to answer calls and convince people to submit a loan application. Because they do not offer advice and guidance—nor are they trained to do so—their companies can keep their costs lower, and may offer lower rates.There is a downside to this, however. The “pull-through rate” (percentage of successfully funded loans) is lower for these call center companies than for local lenders whose loan officers typically have more experience and ability to advise clients than those salespeople sitting in a cubicle in Phoenix or Milwaukee. For people who are buying a home, closing on time is critical. Sellers are often reluctant to accept offers from buyers whose lenders are out of state.It is also important to understand the variables that determine what the rate will be:The borrower’s credit score. Lenders use “risk-based pricing.” This means that they consult a matrix containing credit scores and loan to value ratios. The intersection of the two values for a borrower will determine the adjustment to the “raw” pricing. One example: if two borrowers are applying for the same kind of loan for 80% of the property’s value except that one borrower has a score of 620 while the other has a score of 740, the higher-scoring borrower will get a rate approximately .625% lower than the lower-scoring one. This is true for all lendersThe property type. An 80% loan for a condominium will have a rate about .25% higher than for a single family detached home, for exampleLoan purpose. A borrower seeking to refinance to get cash out of their equity will typically get a higher rate than for a loan of the same loan to value ratio to purchase a homeTiming. Mortgage rates are determined each day by the price of Mortgage Backed Securities. These are the mortgages that Fannie, Freddie and Ginnie have purchased from lenders and pooled into bonds, which are then traded like other securities. Their price fluctuates from day to day according to market forces. A movement of 25 basis points in one day (the equivalent of $0.25 per $100 of bond value) is not unusual—and it affects the interest rate by about 1/16%. A rate quote from two days ago is almost certainly obsoleteI may seem to have a negative opinion of on-line mortgage lenders. The only caveat I would offer—speaking as a brick-and-mortgage lender—is to consider how complex your situation might appear to a lender. Is your income variable because of commissions, overtime or bonus? Do you receive income from self-employment, investments or rental properties? All these factors present potential roadblocks to a successful closing. And if and when a problem presents itself, the presence of an experienced and knowledgeable person may mean the difference between a timely closing and an endless delay.I hope this is helpful and not overly technical.

Here is what I dug up this past quarter:MFH rents are up $2 in August to $1,412, up 3.1% year-over-year and 10 basis points from July. A record high for seven months in a row – Yardi Report – [How long can this increase? Not forever but it is steady expansion. New supply is coming online (300,000) new units this year. Be careful when you read these national reports cause you need to dig into the submarkets]Renter By Necessity (3.5%) continues to outperform Lifestyle (2.4%) as new supply hinders rent growth of luxury units. [This is why you are seeing Class A rents dip in places like San Fran, Seattle, Chicago]Economic Expansion: More Room to Run? – “At 3.9 percent, the August 2018 unemployment rate is at an 18-year low. However, it took the jobless rate, which peaked at 10 percent in October 2009, more than seven years to reach the trough of the previous cycle”Deals Pick Up the Pace in Q2 – CPA Executive – [Graph of deal volumes]Article on Opportunity Fund Zones – Yardi – [Could smart money dumping gains to go into Opportunity Zone Funds causing the sell-off?]Yardi Report for September 2018Freddie Mac Launches Workforce And Targeted Affordable Mezzanine Loans To Strengthen Housing Preservation – BizNow –“Strong candidates for the mezzanine programs have experience with affordable housing and a history of transactions with a GSE like Freddie Mac. Mezzanine borrowers are required to pledge a first-priority lien for 100% of equity interests in the senior borrower. Borrowers must also keep at least 80% of the units — including the 50% that are affordable to households making 100% area median income — over the life of the mezzanine loan. Borrowers can’t pay off the mezzanine loan to get out of affordability restrictions.”[Interesting new program which shows how the government is trying to help out the little guy] Additional article.Apartment Market Has Bright Future at 2018’s Midpoint – MFH Housing News – Delayed marriages, an aging population looking to move out of single-family homes and increasing international immigration are some of the reasons a study from the National Apartment Association (NAA) and the National Multifamily Housing Council (NMHC) predicts soaring demand for apartments over the next decade-plus. According to the study, 4.6 million new apartment homes will need to be built by 2030 just to meet the demand, the report says.[More and more people are being forced into apartment lifestyles]MBA: Commercial/Multifamily Originations Up in Second Quarter, on Pace With Year Ago – MBA – “Second-quarter commercial and multifamily mortgage loan originations came in 4 percent higher from a year ago and 32 percent higher than the first quarter, the Mortgage Bankers Association reported this morning.” – [Despite some volatility growth is steady]Inside the scandal that could explode multifamily real estate – Housing Wire –[I have heard of sellers falsifying docs which is why you check rent rolls and follow up with on-site checks. In this case, it was the new buyers. I suspect this is mortgage fraud in order to get the non-recourse debt]In this stage of the market cycle, the search is on in Tertiary markets – Forbes – [I’m seeing secondary markets as too hot at this point in the national market cycle]Where is the growth going? – ULI – [Very insightful source from a non-biases real estate publication]Surviving the Retail Revolution – CP Executive – [Everyone thinks Amazon is going to kill retail (I think mid-range retail like Macy’s is going away) but when everyone thinks one thing that may mean the opposite is true]My friends in Seattle tell me all the time that the Class A rents are coming down 10-15%…Looks like the Hedge funds are playing in the Mobile home park space – Bloomberg – [The smart money is starting to flow into MHP space]Clear Skies for Multifamily Investors – MFH Housing News – “While these increases are starting to cause upward pressure on cap rates, apartment values have held relatively steady since tighter occupancy levels are simultaneously causing upward pressure on rental rates. “interest rates ticked up another 25 basis points in June, marking the second time this year that the Fed has raised its fed fund rate. There will likely be two more rate hikes this year, and at least two anticipated in 2019.”Self Storage Shakeout Ahead? – CP Executive – [I have been trying to learn different asset classes and so close to jumping into a guru educational program or feeder conference just to get into the group. It’s hard to tell what is the real story but for now, I will just absorb info like a sponge]Rising Interest Rates: The Calm Before the Storm? – MFH Housing News – The Federal Open Market Committee announced the second short-term interest rate hike this year, prompting industry professionals to give their take on the possible effects this might have on the lending process. – “There has been talk about the Fed raising rates every three months. The Fed has penciled in two more rate hikes this year—we should expect one more for sure in my opinion.” However, despite rising rates, the yield curve has flattened” [An older article but you can see the clues of what is coming ahead here]Commercial Property Executive mid-year 2018 – [I have been reading this material (example page 24) and trying to learn about different sectors. Shopping retail is notoriously beat down by Amazon but is that the whole story??? Sounds like opportunity if you know what to look for, also look at pg 66 for self-storage]July MFH Yardi Report – linkIt is no secret that cap rate compression is upon us. But “Rents grew 2.6 percent during the first half. “Those numbers compare favorably to most years except the peak years of the cycle in 2015 and 2016,” – MBA.orgEconomists predict the economy will recede by 2020 – Property Management Insider – [Who knows these are headlines just to sell articles]Discussion on absorption in ABCD classes – https://drive.google.com/open?id=1a5eQ9DpdzC7yQgypj-HEJnYQJwk_2dF_Latest market data – https://drive.google.com/open?id=19jOAXXt9pkgsgyeZOXtMODc4bE4SrkBxThis is why we use 1.5-2.0% increases in my of our underwriting models –An eye on vacancy as we test rents higherTexas, North Carolina Dominate Fastest-Growing Apartment Markets List – Real Page – [I think these articles are misinterpreted as Dallas is not where smart investors are looking anymore because it is overplayed]At what point can we put the average consumer? – Arbor – [Rule of thumb is 33% in the previous decade]June 2018 Yardi Report – [Hints of oversupply in next couple years]Huntsville brings on Facebook – $750M investment is expected to yield only 100 jobs – Join us on the next dealHas Our Government Spent $21 Trillion Of Our Money Without Telling Us? – Forbes articlePools of SFH becoming a real asset class – Arbor Lending CheatsheetNY Times – Tax collections would be sufficient to pay about three-fourths of promised Social Security benefits for 75 years.Looks like the money runs out in 2030Trade Wars!Tariffs imposed on EU, Mexico, & CanadaEU is retaliating with tariffs on US steel, agricultural, and other productsMexico is retaliating with a tariff on US steel and farm productsCanada is retaliating with tariffs on US steel, aluminum, and other6/22, US threatening 20% tariff on European cars25% Steel, 10% Aluminum, effect will either lead to hoarding of material or less production (loss jobs in USA) ArticleTrump administration adds to China trade pressure with higher tariff plan – ReutersChina Vows It Won’t Back Down After Trump’s Latest Tariff Threat – Bloomberg,China Says It’s Ready to Retaliate on Latest U.S. Tariff Threat– BloombergDallas and Fort Worth Rents Diverge – BizNow – [The Dumb money has really started to flow into Dallas]I don’t think rates will really rise much in 2019 – Fox News – [But then again it’s a FOX source]REBusinessOnline: “The commercial real estate industry shouldn’t be worried about rate hikes, which are happening in baby steps,” says Dhawan. “If the cash flows on your properties are there, who cares about the rate hikes? The real thing to worry about is what happens in the interest rate market as a result of trade developments.”Crowdfunding sites are dropping like flies because I see so many broken links on my simplepassivecashflow.com/crowdfunding directory.Some of the top 30 U.S. metros over the next five years might be at risk of oversupply – MFH Housing News – [I keep my eye to units coming online and how it is affecting rent increases]Time to Step Up the Value-Add Game – MFH News – [Just have to focus on forced appreciation and not just walk into value by just bumping the rents with the market]Banks still love multifamily deals, but with pricing and rental rates hitting records numbers, they are being more selective – Source – [Where 1.25 Dept Service Coverage Ration was the standard, no longer is DSCR of 1.20 being accepted]The similarities to the years leading up to the “Apartment Recession” of 1972 are eerie – Crowdfunder – [Although coming from a crowdfunding guy and not an operator himself – these guys don’t know the people or the operation]Life sciences trends report [I don’t know how this relates to picking markets or deals but its really interesting]180911 Yardi-Matrix-Monthly-Aug-2018“Economists report that workers are starting to act like millennials on Tinder: They’re ditching jobs with nary a text” – Seattle Times – [A sign of the times. I can remember when it was 2009 sitting in my work truck at 2am in the morning but being so lucky I had a good job]12/11/2018 Forbes – The Yield Curve Just Inverted–Sort Of–And That Is A Sell Signal For Stocks – “the spread between the 2-year and 5-year Treasury notes went negative yesterday, the first inversion of the yield curve since 2007. Why wasn’t this the top headline in the financial media? Because the 2-year/5-year spread is much less widely followed than the 2-year/10-year spread. The 10-year U.S. Treasury note is the most liquid of the Treasuries and one of the most liquid securities in all of global markets and thus it the true benchmark for interest rate traders. The 5-year Treasury lies in what is known as the “belly” of the yield curve and attracts far fewer investor dollars than the 10-year.” https://www.forbes.com/sites/jimcollins/2018/12/04/the-yield-curve-just-inverted-sort-of-and-that-is-a-sell-signal-for-stocks/#a6ca4db3eaae[I do believe that real estate will go down because of consumer instability. But if you have stocks you should sell those before even thinking of lumping it into cashflow type rental real estate.]ITR Experts Say: Actionable Advice for the 2019 Economic Slowdown – ITR – “Be judicious with your capital; conduct a cash-flow assessment plan for proper allocation during the upcoming period of slowing business expansion and weaker topline growth. Continue to focus on talent development but include some redundancy and cross-training initiatives to protect your company in the event that the slowdown becomes a full-blown recession.”[Don’t underwrite any MFH over 2.5% rent increases per year and be prepared to just cashflow a property long term]The National Association of Home Builders Housing Market Index monthly reading, an effective measure of home-builder sentiment, was down 13.0% in November 2018 from the November 2017 level, the sharpest year-over-year drop since 2011. – ITRNew US Home Sales, at 42.0 thousand in October, were down 14.3% from the October 2017 level, again the sharpest year-over-year contraction in monthly data since 2011.- ITRUS Existing Home Sales are in recession, down 1.8% during the last 12 months, on average. Existing Sales in October alone, at 5.2 million units, were down 5.1% from October 2017 – ITR – [Look it’s not getting any easier but you definitely can’t sit on the sidelines, get into solid cashflow deals]US Single Family Housing Permits, which have a short lead time to Starts, are sharply decelerating as well, suggesting that Starts are unlikely to reverse course in the near term.- ITRCommercial sales weakness – ITRThe first big rollback of Dodd Frank [I don’t really know what huge impact this makes yet]Apartment construction starts not yet slowing [I am watching for deceleration – seems we are in steady velocity state]Homeownership very slightly goes up to 64% due to younger people [finally moving out of Mom/Dad’s]Syndication cartoon video (for those visual learners) – https://drive.google.com/open?id=19_DD4uWbj8vkutJMmi5r2Qw7sKR-R7fDSyndications comparisons – https://drive.google.com/open?id=1p3OpRBrIHQVPVT1VEQpLZ_rszMCRqnRzSyndication chart – https://drive.google.com/open?id=19hLpGJnaHzFs5YfiWiBK30Bc3jk1zFa8May Yardi Report – Link – U.S. multifamily rents rose $4 to $1,381 in May. This represents a 2% year-over-year increase but a 50-basis-point decline from April, as new deliveries took a toll on occupancy rates and growth.Traders Can Obsess Over Treasury Yields Once Again: Taking Stock – Bloomberg – [A lot of people geek out over divergences and intersection of keystone graphs but I don’t really understand them yet]