HUD Multifamily Volume in 2019… Down, But Still Not To Shabby
HUD’s multifamily mortgage insurance programs recorded a solid performance in Fiscal Year 2019, which ended on September 30, but overall volume was down from 2017 and 2018. Here’s a look at this year’s numbers:
- HUD closed $11.657 billion in multifamily loans, its lowest volume since 2010, when it closed $10.628 billion in loans. In 2017 and 2018, HUD closed $15.24 and $15.21 billion respectively in multifamily loans.
- The volume of new construction/substantial rehabilitation and refinance/purchase loans in 2019 was about even: $5.52 billion for the former and $5.58 billion for the latter.
- HUD closed a total of 704 multifamily projects in 2019 – 381 refinance/purchase loans, 241 new construction/ substantial rehabilitation loans and 82 “risk-share” loans, which could be for new construction or refinance/ purchase. This is down from 2018, when HUD closed loans for 913 projects and 2017, when they closed loans for 1,056 projects.
- The average size in 2019 for construction/substantial rehabilitation loans was $21,734,000.
- The average size in 2019 for refinancing loans was $14,648,800
- Affordable housing rocks! It represented 45% of HUD’s mortgage insurance commitments in 2019, up from 41% in 2018.
So why the down volume in 2019? Ask five mortgage bankers that question, and you’ll likely get at least 10 explanations. In our humble opinion, the popularity of multifamily housing as an asset class – fueled in part by job growth and lifestyle preferences of millennials and empty-nesters – has attracted many competitive sources of capital, especially for permanent financing, equity and mezzanine loans. Editor’s note – HUD is still one of the best sources of construction financing, as it is non-recourse, prepayable without onerous yield maintenance provisions, amortizes over 40 years, and features fixed interest rates under 4.00% in today’s market.
Despite the off-year for multifamily, we expect HUD’s activity in this space to rebound in 2020, especially with its Section 223(f) refinancing program, when the long-awaited change to the “three year rule” is implemented. What’s that about? Stay tuned to this space for more details soon!
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