Originally posted by JENNIFER LECLAIRE | FEBRUARY 25, 2016
MIAMI – RealShare Apartments East kicked off on Wednesday at the Thompson Hotel in Miami Beach. The biggest question on everyone’s mind in the morning session was the volatility in the government-sponsored enterprises (GSEs).
In a panel called “A Conversation with Fannie & Freddie,” NorthMarq Capital managing director Melissa Marcolini-Quinn moderated a discussion featuring Freddie Mac and Fannie Mae leaders.
Sharon Plattner, director of Freddie Mac and Chip Umstead, director of multifamily credit and underwriting at Fannie Mae tackled a tough question to start the panel: How much volatility is in the market?
“We are constantly oversubscribed,” said Plattner. “Too many people want to get into our K-Deals. We’ve seen some volatility in our A-2s, which are our bonds that trade on a daily basis. That is mainly due to market fluctuations. We price deals every single week. We are in the market all the time and we can adjust our pricing as necessary so we are not seeing heavy losses the way CMBS are.”
Plattner acknowledged a push on spreads. Fannie, she said, has tried to limit the push as much as possible. The GSE holds spreads for 60 days on quotes regardless of the market volatility.
“There has been a lot of pressure on pricing,” said Umstead. “Spreads are up. All in, rates are still attractive. Most of the volatility that I saw was in the floating rate product. That’s balanced out. It’s equalized a little bit more. Investors are entering the market for [the floating rate] product but at a more stabilized rate. The discrepancy between the floating rate and fixed rate money … that divide is not as wide.”
Umstead stressed that there is no one-size-fits-all pricing structure at Fannie Mae. The GSE, he said, takes a balanced approach in its loans to distinguish the real estate. Twenty to 30% of Fannie’s business was floating rate loans.
“We are comfortable in that space,” Umstead said. “It’s where we want to be. It’s a product that’s not hedged for terms. We are comfortable in those percentages and if the market conforms we’d like to stay in that range.”
For Freddie’s part, the GSE did about 40% of its deals at a floating rate in 2015, according to Plattner. The enterprise has done 50% of its deals at a floating rate so far in 2016.
“We see a really strong demand for the seven-year floating rate paper,” Plattner said. “We found we can get a little more competitive than on our fixed rate.”
This article was originally posted to GlobeSt.com and can be found HERE.
