NCSHA Conference
Federal Financing Bank-HUD
Financing
October 18, 2014
The WHY of the
Federal Financing Bank-HUD
Financing Initiative
• Due to the financing collapse in 2008 HFA tax
exempt rates and Ginnie Mae rates inverted.
• Risk Share business volume dropped precipitously
• Risk Share business volume recovered briefly with
the New Issue Bond Program
• Business volume continues its decline in 2014
• In the same period FHA MAP Lending LIHTC
volume has increased dramatically
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HFA Tax Exempt Rates vs. Ginnie Mae Security
Rates
In late 2008 multifamily tax exempt rates and Ginnie
Mae multifamily security rates inverted with HFA tax
exempt rates higher than comparable Ginnies. The
greatest disparity was in late 2012 when HFA rates
were 130bps above Ginnies. In December 2013 a
typical multifamily Ginnie Security was 76bps below a
typical multifamily tax exempt bond offering.
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Tax Exempt vs. Ginnie Mae Security Rates
6.50
6.00
5.50
5.00
4.18
4.50
MF tax exempt rates /
Indicative Aa 30-year
multifamily housing rates
4.00
3.50
3.71
3.00
2.50
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7/1/2014
3/1/2014
11/1/2013
7/1/2013
3/1/2013
11/1/2012
7/1/2012
3/1/2012
11/1/2011
7/1/2011
3/1/2011
11/1/2010
7/1/2010
3/1/2010
11/1/2009
7/1/2009
3/1/2009
11/1/2008
7/1/2008
3/1/2008
11/1/2007
7/1/2007
2.00
GNMA Multifamily
Securities Rate
HFA Risk Share Initial Endorsements FY 2007
to FY 2014
HFA Risk Share Initial Endorsements
(Volume in $MM)
(FY14 Annualized)
500
450
400
350
300
250
200
150
100
50
0
FY07
FY08
FY09
FY10
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FY11
FY12
FY13
FY14
Status of NYCHDC Transaction
• FHA issued firm commitment on October 10th
• NYCHDC converted the financing structure on 10/15
• Project will close in escrow on Monday 10/27
– FFB/HUD Program Financing Agreement
– FFB/NYCHDC Master Purchase and Sale Agreement
– FFB/NYCHDC Master Escrow and Custody Agreement
– NYCHDC/HUD Designation Request to FFB
• FFB Project Funding 10/30
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Program Documents
Target Distribution to HFA Focus Group
Mid-November
•
•
•
•
•
HFA Risk Share Addendum
FFB/NYCHDC Master Purchase and Sale Agreement
FFB/NYCHDC Master Escrow and Custody Agreement
First Supplemental Escrow and Custody Agreement
Form of HFA Opinions of Counsel – Transaction Documents,
Risk Share Agreement etc.
• Form of Opinion of Custodian’s Counsel re Transaction
Documents
• HFA/HUD Designation Request to FFB
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Criteria for HFA Participation
• The FFB program will be limited to Level I HFAs with 50%-50%
risk shares. Level I HFAs have a rating of “A” or better. Twentyeight of the thirty-three approved risk share HFAs participate
at Level I.
• Program will be implemented under existing 542(c) regulatory
framework
– HFA’s will use current risk share underwriting standards
– HFA’s will process environmental reviews
– Program will be implemented through amendments to
existing agreements
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Process for HFA Participation
We will send a email to all HFAs participating in the Risk Share
Program the week of October 20th requesting the following:
1. A request to amend their risk share agreement to participate
in the FFB Program, including an acknowledgement they
meet program requirements e.g. Level I, A rating etc.
2. Projected CY 2015 volume and number of financings by
month
3. Request for the FHA Commissioner to waive 24 CFR
266.620(e) Termination of Mortgage Insurance
4. Other waiver requests
For HFAs anticipating closings in January or February, the letter
should be submitted by November 21st.
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Regulation Waivers – Jerry
McGuire Said “Help Me Help You”
• If you don’t need it now – Can you wait – We want to
focus on waivers for January – March closings.
• “Blanket Waivers” are a problem from a regulatory
law standpoint.
• Waiver Request – Key Points:
– Section(s)of Regulation to be waived
– Reason for waiver – public benefit and any HFA measures to manage
any increased risk
– Expected funding date of initial loan subject to waiver
– List of projects and projected dollar volume for the projects that will
be subject to the waiver
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Timeline for Implementation
Week of
10/26 11/9
Prepare and Distribute
Risk Share Agreement
Amendments
Distribute FFB
Documents
Process Program
Participation Requests
11/23 11/30 12/14
12/28
1/11/15
X
X
X
X
X
Execute Risk Share
Amendments
Execute FFB
Agreements for January
Transactions
X
X
X
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FFB Pricing Criteria - Existing
Properties
• The FFB Initiative is a bridge allowing HFAs to access
capital at favorable rates until the statutory
prohibition on the use of Ginnie Securitization in the
risk share program is eliminated.
• FFB Pricing will be benchmarked to comparable
Ginnie Mae Securities for program type i.e. NC/SR
(221D4) or Existing Properties (223(f).
• Current benchmark indication for Existing Properties
is 105bps over 10 year Treasuries.
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Timing for Closing Existing
Properties
• Property must be converted to permanent phase,
FHA Firm Commitment Issued and Designation
Request must be submitted to FFB 7 business days
prior to funding.
• All documents to which FFB is a party must be dated
as of the funding date, signed by all parties (except
FFB), and placed into escrow on Monday 3 days prior
to funding.
• FFB executes all documents on Tuesday prior to
funding.
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Timing for Closing Existing
Properties – Continued
• FFB sets Certificate rate by Noon on Wednesday prior
to funding. Rate is based on 10 Year UST as of COB
the prior Business Day.
• HFA once it knows the Certificate rate is given until
COB on Wednesday to opt-out of the transaction.
• Closing/funding will occur on Thursday.
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Work Flow – Existing
Transaction Pricing and Closing
Monday
Week One
Wednesday
Thursday
Designation
Request to
HUD
HFA Dry
Closing
Designation
Request to
FFB
Week Two
Week Three
Tuesday
Deliver
Escrow
Documents
FFB
Document
Execution
FFB Pricing Certificate FFB Funding
Rate Set
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Friday
NC/SR Pricing Criteria
• 40 Year term is fine if allowed by FHA insurance.
• FFB is evaluating providing insured draws as well as
funding upon completion.
• Pricing could be as much as 50 basis points higher
than for Existing Properties due to prospect of rising
interest rates.
• There will likely be a fee to extend the construction
phase beyond scheduled date.
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October 2014 223(f) Rates
Mortgage Interest Rate
3.69
3.37
3.55
3.55
3.55
3.65
4.1
3.5
3.75
3.75
3.7
3.3
4.15
4.15
3.4
4.55
4.55
3.95
3.51
Mortgage Amount
$6,951,200.00
$17,443,400.00
$7,043,800.00
$12,389,600.00
$7,820,800.00
$7,946,400.00
$1,145,500.00
$5,114,200.00
$9,254,000.00
$8,348,100.00
$9,120,000.00
$5,145,000.00
$4,000,000.00
$2,840,000.00
$2,190,000.00
$4,080,300.00
$5,989,900.00
$1,607,600.00
$1,699,600.00
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Units
112
200
90
150
95
99
28
126
118
134
174
66
120
80
80
181
191
72
44
State
TN
MD
MA
MA
MA
MA
NY
NY
IL
IL
IN
IN
IN
IN
IN
OH
OH
OH
SD
OMB/Treasury/HUD
Policy Assessment – Mid 2016
• The effect of FFB financing on the broader multifamily financing market
• Understand and evaluate any changes in the risk
profile of loans
• Evaluate the extent to which financing cost savings
are passed along to tenants or reduce the amount of
government development subsidies
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Next Steps
• Complete Addenda to Risk Share Agreements
• Circulate FFB Agreements
• Process regulatory waivers - Initially we will focus on
HFAs ready to implement transactions in
January/February
• Initiate development of insured advances or forward
commitment program. A key focus of working group
• Initially we will focus on HFAs with transactions ready
to fund in January-March.
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