The more stringent rules HUD announced this summer for the FHA multifamily mortgage insurance program were no surprise. By the time the Mortgage Letter 2010-21 came out on July 6, the multifamily development and financing community already pretty much knew what the main points were going to be.  

Among the biggest, and most contested, changes are the decrease in the required the Loan-to-Cost (LTC) from 90 percent to 83.3 percent, for the FHA 221(d)(4) program for market-rate new construction. The Debt Service Coverage ratio (DSC) has also been increased, to 1.20 percent from 1.11 percent.

The new requirements make it incumbent on developers to raise more equity‑as much as an additional 10 percent more in cash, according to calculations by Johnson Capital.

Developers are not pleased with the increased requirements. HUD has said it will revisit the guidelines around January 2012 to see if market conditions still warrant the new rules. Will change come before then, however? Word is that although the rules have been passed, the National Association of Home Builders continues its discussions with HUD…

The high-power summit organized by the Treasury Department to discuss the future of Fannie and Freddie occurred this week, yesterday.

It seems to be the tendency of 21^st Century Big Money to have a ideological opposition to “Big Government.” But in this case, homeowners and renters are lucky because industry is coming out in favor of government support, as in government support for the mortgage finance system. Free Marketers are not so pro-Free Market when the government support also helps them.

It is a fundamental fact of human society that certain things cannot be handled by the Free Market. And you need laws and enforcement to hold back thievery, cheating, etc. That’s why you have governments.

Why do we have to make such a basic explanation of human civilization all over again?

Sorry, maybe because of my background, I have not been ideologically brainwashed by the 21^st Century Free Marketers into holding a rabid attitude against governments. I have nothing against “government.”

There was news this morning of a new wave of economic pessimism: exports have fallen and the possibility grows that the 2.4 percent second quarter GDP growth figure could be revised lower.

And the accompanying news was that the yield on the benchmark 10-year Treasury bills had fallen back further, to 2.69 percent. Recently, the yield has been in the 2.90 percent range, and we thought that was low (albeit higher than the low-2 percent levels reached during the depths of the financial crisis in late-2008/early-2009).

Just as I was getting ready to submit a blog today on this subject, I found the news had caught the eye of at least another blogger. A piece was ran late this morning with the title, “The Meaning of 2.71.”

How about it, multifamily? With Fannie and Freddie spreads around 200 basis points for the highest leverage deals, all-in interest rates can be in the 4-5 percent range depending on the transaction, said one lender I spoke to. Low rates like these can generate a lot of cash and additional wealth creation. They can enable more deals to work and/or enable sellers to sell for higher prices?

The commercial real estate sectors are showing greater optimism, and investment activity is starting to come to life again.

The latest National Multi Housing Council (NMHC) Quarterly Survey of Market Conditions released in May showed “widespread improvement” in the apartment sector. The apartment sales volume index even increased to a record, of 72 from 56.

In the midst of the newfound optimism, we have news this week that the national economic recovery is slowing. Some experts even say the consumer spending slowdown will last through 2011.

Will this economic reversal continue into future months, and take a bite out of recent improvements in commercial real estate industry conditions, or at least, sentiments?

So this week President Obama signs into law the financial reform bill, the Dodd-Frank Wall Street Reform and Consumer Protection Act.

The new set of laws supposedly provides for: increased regulation of the financial industries–tightening oversight of the derivatives market–and consumer protections in the use of financial products. It is purported to put into place procedures to help avoid future tax-payer-funded bank bailouts. And it increases capital requirements for banks.

Read some comments about the bills here. And our sister publication Commercial Property Executives earlier discussed (“Upward Climb,” p. 30) the bill’s possible effects on the commercial real estate market specifically. In particular, lenders were required in the House bill to have more “skin in the game” in CMBS, which could mean more careful lending.

Like many industries, the apartment sector relies ultimately on job growth to drive demand for its products.  

In its recent white paper, NAI Global points to a projection that by mid-2013, the U.S. will see the same number of jobs as at the beginning of September 2008.

That does not appear exactly to be good news, when you think that every year new people also enter the labor force. (The U.S. population continues to grow every year and is projected to reach almost half a billion in 30 years’ time.)

Can the trend of weak job creation be sufficiently reversed given the continued loss of jobs due to outsourcing and factory relocations overseas?

The unemployment rate would still be an “anemic” 7 percent by mid-2013, says NAI Chief Economist Peter Linneman. Hence the title of NAI’s white paper, “A Robust Rebound to Mediocrity?”

By Keat Foong, Executive Editor

Colliers held its first annual Global Leadership Summit in Manhattan recently.

The three-day meeting, which  brought together clients and Colliers brokers from all over the world, concluded with a talk by best-selling author Malcolm Gladwell at the Jazz at Lincoln Center theater.

Collier’s recent Global Leadership Summit consisted of high-level strategy sessions and client meetings. Douglas Frye, global CEO of Colliers International, said, when introducing Gladwell, that the investment sales industry would need a different approach in the next three years.

The U.S. Interagency Council on Homelessness (USICH) has put forth its plan to end homelessness.  

The USICH was mandated by the HEARTH Act, enacted by Congress in May 2009, to present a “national strategic plan” to end homelessness to Congress and the President.

The plan puts forward strategies to end homelessness among veterans and the chronic homeless by 2015, and homelessness among children, family and youth by 2020.

Sheila Crowley, president of the National Low Income Housing Coalition, said that her organization looked forward to working with the Administration this year to “identify funding sources” to help communities provide homes and needed services to the homeless.

Yes, in light of the recent defeat in Congress of plans to extend unemployment benefits to Americans due to federal deficit “concerns” on the part of Republicans and Democrat “centrists,” the availability of money is often one of the issues.

There is plenty of private funds seeking below-market properties to scoop up. Recently, GoldOller Real Estate Investments formed a new real estate investment fund to invest in opportunistic and value added opportunities east of the Mississippi.

Already, the fund has acquired three apartment complexes consisting of more than 600 units, in Indianapolis, Greenville, N. C. and Greenville, N. C.  

Richard Oller and affordable housing veteran Jeffrey Goldstein are principals of the new firm, an affiliate of their firm, Multifamily Management Services. The combined companies own and manage apartment communities consisting of more than 30,000 units ranging from affordable housing to high-end residential buildings and premier condominiums.

Together with its affiliate companies, GoldOller offers the full breadth of real estate services from acquisition and development to leasing and asset management.

GoldOller says its relationship with its investors provides it with access to capital and resources to act on appropriate opportunities very quickly, giving it a competitive edge.

Whether you are for or against it, would anyone be really surprised if President Obama tries to privatize social security, or impose regressive VAT taxation, down the road?

For now, President Obama wants to privatize public housing. That is one interpretation of his Preservation, Enhancement and Transformation of Rental Assistance Act (PETRA). PETRA proposes to convert public housing—on a voluntary basis, it is emphasized—to project-based Section 8. This may be a boon to private multifamily owners and developers. Bankers also stand to benefit under the Act. Think of the immense, publicly owned, housing stock that is at stake.

As they say, some things that President George W. Bush never dared try to do are being completed by his successor, President Obama. In light of the current Gulf oil spill, an example is the president’s earlier proposal to open parts of the U.S. coastline to offshore drilling for the first time ever, as a part of an energy conservation packet. Such is the Audacity, Change and boldness that we can believe in.