U.S. home sales fell 2.9% in August, with existing home sales at their lowest level since October 2010, according to Freddie Mac.
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As housing costs remain high, housing lenders in the Midwest are selling bonds to finance mortgages for buyers of single- and multifamily homes.
Existing home sales in August fell to the lowest level since October 2010, and strong employment data earlier this month pushed up mortgage rates and further raised the hurdles to buying a home.
In response, housing authorities in Indiana, Wisconsin and Nebraska are issuing bonds, the proceeds of which will be used to make loans to first-time homebuyers and low-income buyers.
First-time homebuyers account for much of the demand in today’s housing market, according to Freddie Mac’s October 18 Economic, Housing and Mortgage Outlook. But they often have less economic leverage than homeowners, with the Mortgage Bankers Association finding that refinance activity accounted for 55% of all application activity as of September.
Additionally, total home sales fell 2.9% in August, even as existing home inventory reached its highest level since July 2019. The National Association of Home Builders’ Housing Market Index shows homebuilder confidence below 50, with Freddie Mac indicating that “building conditions are expected to remain poor in the near term.” said.
In Wisconsin, the Wisconsin Housing and Economic Development Authority will issue $93.8 million in Series 2024A and 2024B Housing Revenue Bonds. A bond is a general obligation of the authority, and all of the authority’s rights and interests in the proceeds, proceeds, pledged funds, and mortgages financed are pledged for payment of the principal or redemption price and interest of the bond. It has been.
WHEDA public affairs program manager Rachelle Berry said the deal is comparable to today’s prices. The lead book-running managers for the transaction were Wells Fargo Securities and Ramirez & Company, with Kutaku Rock LLP and MWH Law Group LLP serving as joint bond advisors. WHEDA does not use local government advisors.
“Historically, demand for WHEDA Housing Revenue Bonds has been good,” Berry said. “WHEDA is combining multiple developments into a single bond issue. The timing of the bond issuance is determined by the development completion timeline.”
Mr Berri said the authority was making progress on the housing affordability front, but “from our perspective, the cost of developing affordable housing for multi-family units remains high. “This loan is aimed at filling the gap to move projects forward.” Until completion. ”
Moody’s Ratings rates the bonds at Aa3 with a stable outlook. The rating agency said in its rating action that the rating was due to the authority’s sound financial position.
S&P Global Ratings has assigned a rating of AA+ with a stable outlook.
Credit analyst Raymond Kim said, “We believe the program management and operational risk assessment is overall neutral, with cash flow and asset cash positioning to withstand overcollateralization and S&P Global Ratings’ expected loss assumptions. Sufficient liquidity to cover short-term disruptions in asset cash flows, and sufficient liquidity to cover short-term disruptions in asset cash flows; “There is sufficient liquidity,” he said. and the characteristics of our market position in line with the national housing market, which we consider to be neutral. ”
Proceeds from the bonds will fund mortgage loans secured by multifamily housing projects, fund capital reserves and pay issuance costs, according to a preliminary official statement.
The authority had issued $868.84 million in bonds as of June 30, making the bonds equivalent to Series 2024 bonds.
These previous bonds funded 280 long-term mortgages on 219 developments containing 14,592 units, according to preliminary public statements. Approximately 39 of the developments financed to date are eligible for Section 8 housing assistance payments.
The Nebraska Investment Finance Authority will issue $130.5 million in Series 2024G and 2024H single-family home revenue bonds, with proceeds to be used for financing through the First Home Program and the Welcome Home Program.
“The market environment over the past year or so has been somewhat favorable for (housing income bond) issuance, with more focus on housing than ever before, so HFA is becoming more popular among real estate agents and lenders in the market,” said Elizabeth Fimbres. There is increasing attention to it.” , Communication Manager at NIFA.
Fimbres said NIFA adjusts the timing of bond issuances based on the need for additional funding for the single-family financing program.
“NIFA continues to track program volume on a weekly basis as we determine when to schedule publication,” she said.
Recently, he noted, NIFA has offered interest rate options that are 50 to 75 basis points below normal market rates, and offers down payment and closing cost assistance of up to 5 percent of the home purchase price.
According to POS, the Series 2024G and 2024H bonds are limited obligations of NIFA and are payable solely from proceeds from program operations.
NIFA’s bond principal balance totaled $1.923 billion as of September 30.
The Authority will use the bond proceeds from Series 2024G bonds, which are designated as Social Bonds, to acquire, purchase, and finance approximately $92,275,000 of mortgage-backed securities issued or guaranteed by Ginnie Mae, Fannie Mae. Funding under the First Home Program will be made available. or Freddie Mac, and acquire, purchase and finance approximately $2.43 million in principal amount of community program loans.
The bond proceeds from the Series 2024H Bonds and funds available in the $20 million contract agreement will be used in the Welcome Home Program to acquire, purchase, and finance approximately $52,867,000 of mortgage-backed securities issued or guaranteed by Ginnie Mae. used based on. to obtain, purchase and finance Fannie Mae or Freddie Mac and community program loans in the amount of approximately $1.68 million;
S&P rates the bonds AAA with a stable outlook. The rating agency noted in its rating report that bonds issued through the agency’s single-family home revenue bond program are comparable to other outstanding debt under the master indenture.
“The stable outlook reflects the credit quality of the underlying MBS assets backed by Ginnie Mae, Fannie Mae and Freddie Mac, as well as program management and operational risk assessments,” said S&P credit analyst Daniel Palter. “
JP Morgan will act as lead manager for the transaction. The bond advisor is Kutak Rock, LLP. The city’s advisor is cfX.
In Indiana, the Indiana Department of Housing and Community Development has issued $198.62 million in single-family mortgage revenue bonds, Series 2024 D-1, which is comprised of $97.125 million in tax-exempt bonds, D-2; It consists of $2,875,000 in tax-exempt bonds. AMT, and D-3, $98.62 million taxable tranche.
According to the POS, proceeds from socially designated bonds repay previous bonds, make available funds for the purchase of mortgage securities to fund mortgage originations to qualified single-family borrowers, and provide for down payment assistance loans. He plans to raise funds.
2024D bonds are special obligations of the Authority, paid for and secured out of revenue and assets pledged under the contract. These are secured on a par with other debt issued by the authority and totaled $1.765 billion as of October 1.
Series 2024D mortgages purchased with proceeds include loans for the acquisition or acquisition and rehabilitation of Indiana homes, in addition to the authority’s First Place, First Step, and Step Down programs, as the case may be. This will also extend to the Next Step program. Continue using Series 2024 D-3 only.
According to POS and the authority’s website, First Place and First Step will assist first-time homebuyers and those purchasing in census tracts through down payment assistance equal to approximately 6% of the home purchase price. Step Down is an interest only program. Next Step is a refinance program for First Place and First Step mortgages.
According to the POS, the authorities said the Series 2024D mortgages were financed through the purchase of Ginnie Mae securities and the purchase of conventional loans through the trustee’s purchase of uniform mortgage-backed securities representing Fannie Mae loans and Freddie Mac loans. POS said it expects that.
In 2019, Fannie Mae and Freddie Mac began issuing a new form of single mortgage-backed securities known as UMBS. UMBS issued by Fannie and Freddie are guaranteed by the companies that finance the fixed-rate mortgages that back the Fannie and Freddie securities and issue the UMBS.
Fitch Ratings has assigned the bonds an AA+ rating with a stable outlook. Fitch attributes this rating to the mortgage-backed securities portfolio’s superior asset quality and to the government-sponsored institutions that “guarantee full and timely payment of principal and interest on each MBS, regardless of the actual performance of the underlying loans.” This reflects the fact that ”
This rating also reflects strong financial and cash flow asset parity ratios and a strong program structure.
“Historically, management has not drawn heavily from corporate debt surpluses and has maintained a high corporate debt asset parity ratio,” Fitch said.
Moody’s has assigned the bond an Aaa rating with a stable outlook. Moody’s affirmed the Aaa rating of the agency’s single-family mortgage income bonds due to the agency’s program’s strong financials, including an asset-to-liability ratio of 1.18, a high-quality loan portfolio, a sound legal structure, and cash flow projections that ensure timely debt obligations. He said it stems from the situation. service.
The rating agency also noted that the program’s share of floating rate debt has declined, to 4% of total debt outstanding.
Last year, the agency’s homeownership program provided $26.03 million in down payment assistance on 2,520 mortgages in 89 counties, said Haley Wolfe, IHCDA communications specialist.
“The Home Ownership Office is on track to record record numbers by offering up to 6% down payment assistance, along with competitive interest rates, to make homeownership more achievable,” he said. ” he said.
Mr. Wolf did not respond to questions about the pricing date for Series 2024D bonds.
JP Morgan is the lead manager for the transaction. The bond advisor is Ice Miller LLP. The city’s advisor is cfX.
