Atlanta-based non-QM lender Angel Oak Cos., through its mortgage-backed securities conduit Angel Mortgage Trust, has unveiled its sixth private-label securities (PLS) offering of 2022, even as fast-rising interest rates have jumped far ahead of the lower-rate legacy loans securing the deal.

The average coupon is 5% for the pool of 795 non-qualified (non-QM) mortgages backing the current offering — dubbed AOMT 2022-6, valued at $389.3 million, according to a bond-presale report by Fitch Ratings

Because non-QM, or non-prime, mortgages are deemed riskier than prime loans, in a normal market they generally command an interest rate about 150 basis points above prime agency rates, according to industry executives. 

Freddie Mac’s latest Primary Mortgage Market Survey places the current rate for a 30-year fixed mortgage at 6.02%. The non-QM loans in Angel Oak’s six PLS offerings year to date, on average, are at least 1 percentage point below that prime agency rate.

Through mid-September of this year, Angel Oak has launched a total of six non-QM PLS offerings involving about 5,000 loans valued at $2.5 billion. Last year through mid-September, Angel Oak had brought a total of five non-QM securitization deals to market secured by 3,191 mortgages valued at $1.5 billion.

For all of 2021, the lender recorded eight non-QM PLS offerings secured by a total of 6,152 mortgages valued at $2.9 billion, according to bond-rating reports from Fitch Ratings and Kroll Bond Rating Agency.

“Historical performance [through 2021] for nonprime originations securitized by AOMT dates back to 2014; the performance to date has been strong relative to the credit attributes, reflecting a supportive economic environment, as well as sound underwriting and operational controls,” the Fitch presale report states.

That supportive environment shifted in 2022, however, as the prime rate doubled over the first half of the year, and now reaches beyond 6% for a 30-year fixed mortgage, compared with 2021, when rates averaged 3% or less for much of the year. 

“We have got three securitizations across our Angel Oak family of funds this year [as of May 12],” Namit Sinha, co-chief investment officer at AOMR, said during the company’s first-quarter earnings call with analysts. “… And all of these deals have had coupons in the mid- to high 4% [range], which you would consider to be in the current context of the market discount coupons.” 

That picture hasn’t changed much with the later PLS deals. Year to date, Angel Oak’s six PLS offerings have involved loan pools with an average coupon ranging from 4.5% to 5%, bond-rating reports show, with seasoning ranging from 7.4 to 10.7 months. That means all the PLS deals have been dominated by legacy loans from 2021, when rates were much lower than they are today. 

Non-QM mortgages include loans that cannot command a government, or “agency,” stamp through Fannie Mae or Freddie Mac. The pool of non-QM borrowers includes real estate investors, property flippers, foreign nationals, business owners, gig workers and the self- employed, as well as a smaller group of homebuyers facing credit challenges, such as past bankruptcies. 

Angel Oak Mortgage Inc. (AOMR), a real estate investment trust that is part of the Angel Oak Cos. family, announced in August that it recorded a net loss of $52.1 million for the second quarter ended June 30 — bringing its total losses for the year to $95.7 million. AOMR recorded a $43.5 million net loss in the first quarter of the year. 

AOMR is a long-term player in the non-QM mortgage market and is externally managed and advised by an affiliate of Angel Oak Capital Advisors. The Angel Oak Cos. family of affiliates also includes private non-QM lenders Angel Oak Home Loans and Angel Oak Mortgage Solutions.

Contributing to AOMR’s first-quarter loss was the “$2 million of securitization costs” associated with AOMR’s February 2022 PLS offering alone, Brandon Filson, AOMR’s chief financial officer, said during the company’s first-quarter earnings call on May 12. 

The common theme in the earnings results for both quarters is the impact of fast-rising interest rates and rate volatility on Angel Oak Cos. residential mortgage holdings and operations. In general, lower-rate mortgages are at a competitive disadvantage in terms of pricing in securitization and loan-trading liquidity channels in such an environment because they are worth less than the newer crop of higher-rate mortgages coming online. Keith Lind, CEO of non-QM lender Acra Lending, put it this way: “These aren’t bad loans, just bad prices.” 

“We continued to experience a challenging economic environment in the second quarter of 2022,” said Robert Williams, president and CEO of AOMR, reflecting on the company’s latest earnings report. “Historic inflationary pressures resulted in continued volatility, both in nominal interest rates and in the widening of interest rate spreads, driving unrealized losses on our portfolio of target assets.” 

AOMR has bulked up its warehouse lending arsenal to help bolster liquidity to better cope with the volatility of the current market. Its second-quarter earnings report­ shows that it added a new $340 million warehouse financing facility during the quarter, and since the end of the second quarter it increased the capacity of an existing warehouse line by $260 million — to a total of $600 million. The added warehouse financing capacity brings “the maximum availability on all financing lines to $1.9 billion,” the REIT reported.

“The lower-coupon loans have become sort of orphans of the market,” Lind said in a prior interview focused on the overall PLS market, not Angel Oak specifically. “Investors are not jumping to buy bonds backed by [mortgage loans with] coupons so low that the loans [in the collateral pools] can’t even cover the coupon on the bonds and securitization [costs]. 

Even in the face of those headwinds, Angel Oak’s securitization pipeline this year continues to stay on pace with 2021 — even slightly ahead of pace. Tom Hutchens, executive vice president of production at Angel Oak Mortgage Solutions, said in a prior interview that “nobody really knows where this [rate volatility] is going to stop because there’s so many factors that that make up rates.” Among those factors is the Federal Reserve’s drive to fight inflation by bumping up the benchmark federal funds rate, with another increase of at least 75 basis points expected to be announced on Wednesday, September 21.

“The interest in securitization and investing in this space is still very strong,” Hutchens added. “The hiccup that we’ve seen isn’t a credit issue. No one’s concerned about the quality of non-QM loans — it’s just that the rate environment has been so crazy.”

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Before the pandemic, the historical average of annualized house price growth was approximately 4%. Yet, pandemic-era dynamics exacerbated an already large housing demand and supply imbalance, fueling record-breaking annual house price growth, peaking at nearly 21%.

Today, as affordability wanes and housing supply ticks up, house price growth is decelerating and will likely continue to trend towards its historical average. Buyers and sellers alike have now anchored their expectation of “normal” to sub-3% mortgage rates, multiple-offer bidding wars, and double-digit annual price growth.

As a result, the “great deceleration” may feel more severe as the housing market comes off its two-year sugar high and shifts to a not-so-new normal. The normalization will look different depending on local market conditions, but a repeat of the housing market crash is unlikely. So, if this time it’s different, what are the forces that will drive the housing market forward or hold it back?

The tailwinds

There remains a deep-seated desire for homeownership, especially among younger millennials who continue to age into their prime home-buying years. This desire is buoyed by the increased ability to work-from-home and the need for more space.

Compared with the fourth quarter of 2021, the homeownership rate in the second quarter of 2022 for households under 35 years old increased by 0.8 percentage points, more than any other age group. The homeownership rate increase happened during a quarter when the 30-year, fixed mortgage rate increased at the fastest quarter-over-quarter pace since 1980.

That’s because buying a home is both a financial and lifestyle decision. While the more than 50% year-over-year decline in affordability will continue to temper millennial homeownership demand in 2022, lifestyle choices that highly correlate with homeownership will persist and keep millennials as the driving force in potential homeownership demand. 

Millennial demand also makes this housing slowdown different from the previous boom and bust. Looking back at the housing bubble in the mid-2000s, house price appreciation was characterized by a surge in demand driven by wider access to mortgage financing and a rise in speculative and fix-and-flip buying. While speculative buying still persists, the primary driver of current housing demand is first-time homebuyers, armed with mortgages that have been underwritten with much stricter lending standards, further mitigating the risk of a housing bust.

The headwinds

Buying a home is the largest financial decision a person will likely make, predicated on one’s lifestyle choices, financial security and economic certainty. Affordability is a concern, especially among first-time homebuyers who do not have the benefit of equity from the sale of a home. Mortgage rates at or above 5% are likely the not-so-new normal and, if house prices don’t moderate sufficiently to offset the affordability loss from higher rates, then potential buyers will continue to lose purchasing power.

Additionally, inflation and the corresponding risk of a Federal Reserve-induced recession with potential labor market consequences remain concerning and are severely impacting consumer confidence. This could weigh on purchase demand, prompting an acceleration in house price moderation.

While increasing from historic lows, housing supply remains a challenge. The recent rise in inventory is more about homes sitting on the market longer than new inventory being added. The months’ supply of existing homes in July 2022 was approximately three months, still below the historical average of six months, but trending toward it.

While more new homes are expected to come to market, existing-home sales are likely to stall. The reason? The rate lock-in effect of higher rates, which incentivizes homeowners to keep their current mortgage and stay in their existing homes. Existing homes historically filter down to the first-time homebuyer, so the ongoing supply shortage will continue to weigh on the housing market, and particularly first-time homebuyers.

The likely outcome

The housing market has the demographic wind at its back, which will keep a floor on how low demand can go. The recent pullback in demand is a function of two factors — some buyers can no longer afford to buy given the higher mortgage rate environment and higher home prices, while others are choosing to wait until they feel the economy is on more solid footing. Yet, there remains a long-run shortage in supply relative to demand, which supports a natural moderation of house prices nationally, rather than a sharp decline. 

Indeed, a sharp decline in prices would require a wave of distressed selling, which is unlikely. The housing crisis that triggered the Great Recession was fueled by job losses in combination with homeowners with little to no equity.

While some pockets of the country that became overvalued over the course of the pandemic will face a more severe slowdown, homeowners today have very high levels of tappable home equity, providing a cushion to withstand potential price declines.

Want to learn more about what to expect when it comes to the future of the housing market? This article offers a preview of our upcoming HousingWire Annual Housing Market Super Session that will feature an all-star panel of housing experts. Join us in Scottsdale, Arizona Oct. 3-5 to attend this super session that is designed to help attendees understand macroeconomic data and housing trends for the next year and beyond. To register for HW Annual, go here.

This column does not necessarily reflect the opinion of HousingWire’s editorial department and its owners.

To contact the editor responsible for this story:
Brena Nath at

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New home purchase applications in August were down year over year but rebounded after four consecutive months of declines despite higher mortgage rates, declining homebuilder sentiment and looming economic uncertainty, the Mortgage Bankers Association (MBA) said.

The MBA’s builder application survey (BAS) data for August showed mortgage applications for new home purchases declined 10.1% from a year ago. Application volume rose 17% from July 2022. 

About 699,000 new single-family homes were sold in August at a seasonally adjusted annual rate, marking an 18.3% increase from July, but still 23% lower than the November 2021 peak and down 20% from last year, the MBA estimated.

“Ongoing volatility in mortgage rates in the months ahead may lead to larger than typical swings in the pace of new home sales,” said Joel Kan, MBA’s associate vice president of economic and industry forecasting. “Between moderating sales prices and volatile mortgage rates, buyers seem to be biding their time.”

Mortgage rates have been on an upward trend since August after retreating briefly in July. The average 30-year fixed-rate rates closed out the month of July at around 5.1%, according to Mortgage News Daily, and hit 6.42% on September 19. With the Federal Reserve expected to conduct its fifth rate hike of the year on Wednesday, industry watchers will be closely watching how the markets respond to the Fed’s actions.  

The average loan size of new homes declined for the fourth straight month to $415,594 in August from last month’s $416,029, which is a sign of “slowing home-price growth in the new homes market,” according to Kan. 

Conventional loans accounted for 72.1% of loan applications. Federal Housing Administration (FHA) loans made up 17%, Veterans Affairs (VA) loans were 10.7% of total applications and Rural Housing Service (RHS) and United States Department of Agriculture (USDA) loans contributed 0.2%. 

The survey tracks application volume from mortgage subsidiaries of homebuilders across the country. Using this data, MBA provides an early estimate of new home sales volumes at the national, state and metro level. 

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As I begin gathering my thoughts about what might happen next year, I like to look back at my predictions for the previous year to see how I did. It’s useful to look at what I got right and learn from what I got wrong to become a better investor. 

I’m not a professional forecaster and don’t maintain my own economic models. But as an analyst and an investor, I do study tons of data to form a thesis about what is likely to happen in the coming months and years. The point is not to get it all right—that’s impossible. Data is backward-looking, and we can never say for certain what will come next. The point is to understand the most likely scenarios and to form a thesis about the economy that enables confident decision-making. 

I create a lot of content and update my thesis regularly when new data emerges, so I don’t have one concrete “prediction” from last year, but let’s look at some of the themes that made up my 2022 thesis.

A Tale of Two Halves 

In January 2022, I wrote“I don’t think the dynamics of the housing market will change too much in the coming months. Demand is still strong, supply is still incredibly low, and prices will likely keep going up…Ultimately, what happens in the second half of 2022 is more of a question mark for me. My estimate right now is that cooling will drop year-over-year appreciation to 2% to 7% appreciation rates by year-end.”

A major part of my thesis last year was my strong belief that 2022 would be “a tale of two halves” for the national housing market. We knew the Fed wasn’t going to start raising rates until March, and I felt that given the seasonality of the housing market, price appreciation would peak in Q2, and then the second half of 2022 would see cooling.

Overall, I think I nailed the timing of the market shift. It looked like home prices in many markets peaked in June (while others are still growing), and are now seeing month-over-month declines (which is different from year-over-year, which is how I made my prediction). The shift happened right at the halfway point! The most recent weekly data from Redfin shows year-over-year appreciation at around 6%, which is right in range, but we’ll just have to see if I was right about 2-7% by the end.

The Fed Playbook

In November of 2021, I wrote, “If rates rise quickly, it could cause a shock to the system, and housing prices could slide backwards. But, the Fed is not likely to do that. They will likely try to raise rates as slowly as possible to allow economic expansion and wage growth to counteract the impacts of rising rates. This is what happened post-Great Recession, which was one of the strongest periods of property price growth in American history—despite rising rates. That said, if inflation stays high for too long, or even starts to accelerate, the Fed could be forced to raise interest rates faster than they want to, which could hurt housing prices.“

I think I got the logic here right, but with a caveat (more about that below). I believe the Fed’s intention around the end of 2021 was to follow their old playbook from post-Great Recession and raise rates slowly. I believed that because they said that’s what they would do! 

This wasn’t exactly a hot take. But, I did recognize the very real chance the Fed could be wrong about inflation, and they could be forced to break from its post-Great Recession playbook and raise rates rapidly. And as we all now know, that’s exactly what happened. 

Mortgage Rates

Although I recognized the Fed might be forced to raise rates quickly, I’ll be honest, I did not think interest rates would rise as quickly as they did, as much as they did. I thought supply-side improvements would help moderate inflation sometime in Q1 or Q2 of 2022 (even though increased monetary supply and strong demand would keep inflation relatively high), and then the most likely course for the Fed was to follow their 2009 playbook and raise rates gradually. 

But that’s not what happened. Instead, lockdowns across the globe persisted, and the Russian invasion of Ukraine caused even more supply-side issues. These events, coupled with the increased monetary supply and strong demand, sent the CPI higher than I believed it would go. It remains stubbornly high today, and mortgage rates are hovering around 6.25% as of this writing. 

About those mortgage rates, that’s where things went off the rails for me. On November 21, 2021, I posted this on Instagram (I’m @thedatadeli if you don’t follow me): 

instagram post datadeli
Average 30-Year Fixed-Rate Mortgage Predictions – @thedatadeli (Instagram)

Wow. It burns my eyes just looking at that. When I can’t fall asleep at night, it’s this post that haunts me. 

To be fair to myself, this was posted before the Fed announced three rate hikes in 2022, and we were flying blind, but I figured I’d give you all a good laugh at my expense. And, at least I was very slightly less wrong than, CoreLogic, and Redfin. 

But to be honest, even once the Fed announced three rate hikes in 2022, I still didn’t think we’d have rates as high as we do today. I figured we’d still end 2022 somewhere around 5%. Given that rates are around 6.25% as of this writing, I think it’s safe to say I missed badly on this one. I knew rates were going up to a more ‘normal’ level, but I just didn’t think the Fed would be as aggressive as they have been. I expected inflation to come down sooner, not because of Fed action, but because the supply chain would open up. That didn’t happen, and the Fed is going full throttle on rate hikes with limited success in containing inflation so far. 

Given this, I see more downside risk in the national housing market than I did at the beginning of 2022. The decline in affordability accompanying this rapid rise in rates will weaken demand and put downward pressure on prices. It’s hard to say what will happen from here, but I still believe that a “crash” (20% decline or more) is not the most likely scenario on a national level, but some markets could see crash-level declines. 

The Inventory X Factor 

When we entered 2022, inventory (the number of homes on the market at any given time) was historically low. When inventory is super low, it signals a seller’s market that is likely to see price appreciation. And sure enough, that’s what we saw in the first half of 2022. 

I knew that as rates rose, affordability and demand would fall, typically sending inventory upward. But inventory is not just about demand. It’s also about how many homes are listed for sale. There’s a lot of seller psychology to account for. Most people don’t want to sell their homes for a loss, so in a correcting market, many sellers opt to wait out the correction. I wrote about this idea in May if you want to understand more. 

I honestly wasn’t sure what would happen in the second half of 2022, which is why I considered it the X factor that would ultimately determine if the national housing market remained slightly positive or skewed negative by the end of the year. I landed on the side of “slight modest YoY appreciation” because I was skeptical we would see inventory hit pre-pandemic levels, which turns out to be correct. Whether my price prediction is correct remains to be seen. 

all homes for sale nationally redfin
All Homes for Sale (2012-2022) – Redfin

But the simplicity of this national-level chart betrays what’s really going on in the market—the housing market is splitting. Different metros are seeing very different inventory dynamics. 

Just look at the difference in Active Listings between Austin and Boston. 

austin housing market stats
Active Listings in Austin, Texas – Redfin

In Austin, Active Listings are up 60% YoY, which indicates a rapid shift from a seller’s market to a buyer’s market. Pretty easy to see prices coming down in Austin. 

On the other hand, we have Boston, where active listings have been declining! Still a seller’s market here. Prices could still moderate, but on a much smaller scale than in Austin. 

boston housing market stats
Active Listings in Boston, Massachusetts – Redfin

So inventory really is becoming a major X factor! We’ll still have to see this all play out, but it’s definitely the number one thing I’m watching these days. 


Given the complexity of the economic climate in 2022, I think my thesis has held up pretty well so far. Of course, I wish I wasn’t so far off on mortgage rates, but as I said above, the point of developing an investing thesis is not to be right about everything. It’s about formulating an educated understanding of the market that helps you make informed investing decisions. In that respect, I’m pleased with my 2022 thesis because my overall understanding of the market was good and allowed me to make solid investing decisions. 

I locked in low-rate financing on long-term fixed-rate loans, dove more into large multifamily investments to take advantage of long-term supply constraints, and underwrote deals with little to no market appreciation in the next few years, just to be conservative. 

As we approach another year of uncertain economic conditions, I encourage you all to start thinking about your investing thesis for 2023. Take the time now to take stock of the economic climate and the shifting market dynamics. Think about what might happen in your market in the coming year and how you can make strong investing choices given the realities on the ground. What will high rates do to inventory in your area? What asset classes will offer good returns? How do you protect yourself from a potential rise in unemployment rates? 

You shouldn’t be scared of these conditions just so long as you’re prepared for them. There are always deals to be had. You just have to adjust your thesis to fit the market. To learn more about analyzing deals, be sure to check out my new book Real Estate by the Numbers here!

Run Your Numbers Like a Pro!

Deal analysis is one of the first and most critical steps of real estate investing. Maximize your confidence in each deal with this first-ever ultimate guide to deal analysis. Real Estate by the Numbers makes real estate math easy, and makes real estate success inevitable.

Real Estate by the Numbers book cover

I’ll share my 2023 thesis with you all soon.

In the meantime, I’d love for you all to join me in this exercise in the comments. What did you get right about 2022? What did you get wrong? Let’s all share and learn together.

Note By BiggerPockets: These are opinions written by the author and do not necessarily represent the opinions of BiggerPockets.

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No serious observer of today’s economy doubts that it is harder and harder for everyday folks to buy a home. This is especially true for first-time homebuyers across the country, in exurbs, Sunbelt suburbs, and neighborhoods in cities large and small.

This escalating unaffordability affects the long-term opportunities of virtually everyone who doesn’t own a home, and the children of those who do. Some pressures making it so hard for families to buy homes are familiar: increasing household formation, higher interest rates, restrictive local zoning codes, rising building costs. 

But recently a new factor is accelerating the problem — massive purchases of single-family homes by larger investors. In Texas, for example, major institutional investors bought 28% of the single-family homes sold in 2021. Nationally, institutional investors are buying over 13% of homes, and that share is increasing. The share of homes being bought by families has dropped from 83% to 72% in the last three years, while the share by investors owning more than 100 properties has more than doubled. 

More important still, institutional investors are overwhelmingly purchasing entry-level homes, averaging 26% below the median state sales price. This greatly reduces the inventory of the homes that first-time buyers would normally seek. 

Black Knight’s national analysis shows too that institutional purchases are highly concentrated in areas with minority families, limiting their ability to become homeowners. While institutional purchases are only one of the factors (albeit the new one) driving unaffordability nationally, their impact is especially intense in these neighborhoods. 

These investors aren’t paying more for homes than families, but their all-cash, as-is, bulk purchases swoop up much of the inventory out of the hands of aspiring homeowners. Significantly reducing the number of entry-level homes that families are competing to buy inevitably forces them to bid up the share of disposable income they have to pay. 

The impacts are felt by renters as well as potential buyers. With fewer families able to become homeowners, they remain in the rental market instead, pushing up the rents that landlords can charge in general. The largest owner of rental homes raised rents 12% last year and sees the potential to keep boosting rents to a higher percentage of tenants’ disposable income. This cycle feeds itself as families — desperate to escape higher rents — stretch even further to buy the limited inventory of homes available to them. 

This feedback loop explains why surging institutional purchases can’t be dismissed as simply shifting stock from ownership to rental — and thus having no overall impact on affordability, even if they limit opportunities for homeownership. The impact of these purchases on available inventory is what matters.

Dramatically reducing the relatively small number of units for sale to homebuyers at any one time increases the prices of those that remain. Shifting those homes to rentals has little impact on the nine times greater stock of units available for rent each year. Obstacles to homeownership drive unaffordability for buyers and renters. 

This kind of big money first began washing over the single-family home market more than a decade ago. But that spate of money has now become a flood, and is only expanding as major investors eye rental single-family homes as a hedge against inflation. 

The White House itself in May 2022 highlighted how “Large investor purchases of single-family homes drive up home prices for lower-cost starter homes, making it harder for aspiring first-time and first-generation home buyers, among others, to access wealth-building opportunities from homeownership.”

This is not just a problem for individual families, including many Black, Hispanic and other families of color. Widespread opportunities for middle-class homeownership has long been foundational to American society, and ownership has been key to the stability of neighborhoods. 

It is natural for investors to want to capitalize on an opportunity. But government subsidies are helping institutional investors beat out aspiring families — making the American Dream less attainable, rather than more. 

Tax policy today enables these investors to deduct the full cost of interest on an unlimited amount of funds they borrow to acquire single family homes. This lowers their funding costs, encourages leveraging private equity with debt and substantially increases such investors’ after-tax rate of return. 

But what if these same tax subsidies were redirected toward encouraging major investors not to buy up tens of thousands of existing single-family homes to rent out long term but to re-sell them to families?? 

A simple change would limit the amount of deductible interest on debt used to acquire existing single-family homes. Setting a cap at $75 million of such debt — 100 times the limit available to any owner-occupant — or a similar level, would have no impact on mom-and-pop landlords and small aggregators operating at the local level, who have long been active in owning single-family homes.

But it would at once raise the effective costs to major investors who are changing the market. 

This same tax change could allow these lost deductions to be carried forward and utilized when homes are sold to owner occupants. Major investors would thus recover these tax benefits, including those who play an important role in buying and fixing up deteriorated homes and selling them to families, and in lease-to-purchase programs. Moreover, there would be no cap on investors building new rental homes, which add to the housing supply. 

This tailored tax change would thus shift government’s role from encouraging Wall Street to own and rent vast swathes of single-family homes to instead encouraging home ownership. 

Would this change be enough to totally stop this trend? Probably not. But it could slow it down and make it harder for institutional investors to squeeze out families trying to buy homes thanks to a federal tax subsidy. And it would shift the federal government’s role to encouraging homeownership. 

Changing the tax treatment of debt used for housing is nothing new. Congress only recently restricted the amount of mortgage debt on which an individual can deduct interest. It has amended the tax code many times over the years to influence investments into different kinds of rental housing, as well. 

American families face plenty of hurdles in buying a home. Unaffordability is already at record levels. They don’t need federal tax policies continuing to making things worse by subsidizing the debt costs of Wall Street housing investment funds. 

Gene Slater is chairman and founder of CSG Advisors, a leading national advisor on affordable housing; during the financial crisis, he helped design what became Treasury’s program financing 110,000 first-time homebuyers. 

Barry Zigas is a Senior Fellow at Consumer Federation of America, former SVP for Community Lending at Fannie Mae and former President of the National Low Income Housing Coalition

This column does not necessarily reflect the opinion of HousingWire’s editorial department and its owners.

To contact the authors of this story:

Gene Slater at Barry Zigas at

To contact the editor responsible for this story:
Sarah Wheeler at

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The housing industry and market watchers in general are preparing for a big week as the Federal Reserve (Fed) is set to announce its next benchmark interest-rate move on Wednesday, Sept. 21, with most observers expecting at least a 75-basis point bump.

Prospects for a historic one percentage point increase, however, remain on the table, according to some market watchers.

“All eyes will be on the Fed this week with their next monetary policy move announced on Wednesday at 2 p.m. with [Fed Chair Jerome] Powell’s news conference afterward,” states financial advisory firm Mortgage Capital Trading (MCT) in its Daily Market Commentary e-newsletter. “Investors are expecting anything in the range of 75- to 100-basis point hike.”

Investment bank Goldman Sachs’ economic-research arm is betting the Fed’s Federal Open Market Committee (FOMC) will boost the federal-funds benchmark by 75 basis points, to a target range of 3% to 3.25%. 

“The bond market is pricing a one-in-four chance of a 100-basis point hike,” Goldman Sachs reports in a FOMC preview delivered by email on Sunday, Sept. 18. “A third ‘unusually large’ hike would be a reversal from the plan Chair Powell laid out in July to slow the pace of tightening, despite little surprise on net in the data.”

Goldman Sachs cites several reasons to expect another large rate bump from the Fed this week, however. Among them are the following: “The equity market threatened to undo some of the tightening in financial conditions that the Fed had engineered, labor market strength reduced fears of overtightening at this stage, [and] Fed officials now appear to want somewhat quicker and more consistent progress toward reversing overheating [fast-rising inflation]….”

Analysts with global financial-services company Nomura Holdings see the FOMC opting for a one percentage point boost in the federal funds rate this week.

“Materializing upside inflation risks are likely to result in the Fed raising rates by 100 basis point [1 percentage point] at the September FOMC meeting, above our previous forecast of 75 basis points,” Nomura states in an analyst note.

The annual U.S. inflation rate was down for the second month in a row in August, to 8.3%, compared with 8.5% in July. Still, the August mark was above market expectations of 8.1%. Core inflation, which excludes energy and food prices, hit 6.3% in August, up from 5.9% recorded in each of the two prior months.

Diane Swonk, chief economist at tax and advisory services giant KPMG, told the Washington Post that said that a 100 basis point boost to the federal funds rate should be on the table, but added that also comes with risks.

“Even though here I am arguing for an even bigger increase, the real issue is rapid increases themselves are destabilizing,” Swonk said.

The CME Group‘s FedWatch tool, which tracks the probability of FOMC rate moves, as of today, September 19, put the probability of a 75-basis point rate hike at 84% — down from 91% a week earlier. Odds for the FOMC lifting the federal funds rate by a full percentage point on Wednesday of this week, to a target range of 3.25% to 3.5%, stood at 16% as of today, up from 0% a week earlier. 

Likewise, FedWatch as of today puts the odds of the FOMC adopting a 50-basis point rate bump at its September meeting at 0%, down from 9% a week earlier.

The Fed’s Federal Open Market Committee (FOMC) has raised the federal funds benchmark rate four times this year, including a 25 basis-point boost in March; a 50 basis-point jump in May; and a 75 basis-point increase in June and again in July — bringing the current benchmark rate to a target range of 2.25% to 2.5%. The rate bump in March represented the first time since 2018 that the Fed has increased rates. 

“[Mortgage] rates have been on an upward trend, with the average 30-year fixed rate topping 6%,” MCT’s daily report states. “With home prices also near multi-year highs, demand has been hampered for many via affordability, which is weighing in on application demand across the country.

“Mortgage rates are under upward pressure this morning as the Fed decision gets closer.”

Following this week’s meeting, the FOMC will meet again in November and December this year.

“We expect 50-basis point hikes in November and December, taking the funds rate to 4% to 4.25% at yearend,” Goldman Sachs’s FOMC preview report states, adding that “we expect the FOMC to slow the pace of rate hikes because … concern about overtightening will eventually rise….”

The post Fed watchers expect at least a 75 bps rate hike appeared first on HousingWire.

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This week’s HW+ member spotlight features Rodney Moss, Executive Vice President at LoanCare.

HW Media: What is your current favorite HW+ article and why?

Rodney Moss: All my favorite articles in HousingWire revolve around servicing innovation – really anything and everything that can help improve the overall experience for homeowners and enhance an asset’s value.

HW Media: What is the best piece of advice you’ve ever received?

Rodney Moss: It was early in my career when I was in investment banking. At the time, I was a financial analyst doing a 100-hour weekly grind when my managing director shared this piece of advice with me: “The business world is divided into two groups of people – processors and rainmakers. You‘ll need to decide which is the one you want to be”.

That was an interesting perspective. I understood that it takes a team effort for a business to be successful but had never thought of what type of role I wanted to pursue. The rainmaker concept really resonated with me and piqued my interest in business strategy and development.

It’s the synergy of market opportunities with business relationships that really energizes me. Creating mutually advantageous partnerships that not only grow revenue but also serves as a catalyst for innovation. 

HW Media: If you could pick a different career path, what would it be?

Rodney Moss:  I would have been a surgeon. I have always been fascinated with that side of the medical field – where highly trained and skilled individuals make critical, often life-saving decisions and then follow through on those decisions with technical procedures and precise movements. However, the requisite 10 years of medical school was a significant detractor for me.

HW Media: When do you feel successful in your job? 

Rodney Moss: I feel like a success at my job whenever all stakeholders involved in a potential, new or existing business relationship feel like “it’s a win” – instances where everyone in our organization is excited about a partnership, everyone on the client side is excited about the partnership, and the customers who we service are benefiting from that partnership – which is to realize a better overall experience.

HW Media: What’s 2-3 trends that you’re closely following?

Rodney Moss: I’m closely following the Mortgage Servicing Rights (MSR) market and how it is functioning right now both in terms of current price levels and active participants. I’m also watching the supply of MSRs, whether they will continue to be trading at record levels, who is buying, and how that will affect the subservicing market. Another trend I’m keeping my eyes on is the increasing use and transparency of servicing data to make better portfolio decisions to manage assets and portfolios more effectively.

HW Media: What keeps you up at night (think of a problem or issue in the housing space) and why?

Rodney Moss:  The affordability problem for first-time homeowners is of considerable concern to me. How are my children going to access the housing market given current price levels and institutional investors buying up properties on an all-cash basis? After all, housing is the largest creator of wealth. But if you cannot access that first home, how is that wealth going to be developed? I don’t think enough attention is being paid to this issue because it affects everyone in our society. 

Join HW+ members and others, to this years HousingWire Annual, go here to register.

To become an HW+ member, click here.

For more information on HW+ benefits, click here.

To view past issues of our HW+ exclusive HousingWire Magazine, go here.

The post HW+ Member Spotlight: Rodney Moss appeared first on HousingWire.

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Fannie Mae has completed the sale of its 27th reperforming-loan offering since the inaugural transaction in 2016.

The deal represents Fannie Mae’s fourth reperforming-loan sale this year and involves a total of some 6,060 loans valued at $986.4 million. The offering — originally announced August 11 and dubbed FNMA 2022-RPL4 — was divided into three loan pools that were awarded separately. 

Pool 1 was composed of 1,790 loans valued at $337.8 million; pool 2, 2,217 loans valued at $338.9 million; and pool 3, 2,055 loans valued at $309.7 million. Terms of the sale were not disclosed.

“The winning bidders were Pacific Investment Management Co. LLC (PIMCO) for Pool 1, DLJ Mortgage Capital Inc. (Credit Suisse) for Pool 2, and Sutton Funding LLC(Barclays) for Pool 3,” Fannie Mae’s announcement of the sale states.

The transaction is slated to close by October 26. The reperforming-loan pools were marketed with Citigroup Global Markets Inc. acting as advisor.

A reperforming loan is a mortgage that has been or is currently delinquent but has been reperforming for a period of time. 

“All purchasers are required to honor any approved or in-process loss mitigation efforts at the time of sale, including forbearance arrangements and loan modifications,” Fannie’s announcement of the reperforming-loan sale states. “In addition, purchasers must offer delinquent borrowers a waterfall of loss mitigation options, including loan modifications, which may include principal forgiveness, prior to initiating foreclosure on any loan.” 

Through four offerings to date, Fannie Mae has brought to market 31,780 reperforming loans valued at $5.4 billion, which is about one-third of the loan volume and count offered in total for all of 2021. Fannie Mae last year put on the market some 100,000 reperforming loans across five offerings with an aggregate unpaid principal balance of $14.5 billion, according to an analysis of the agency’s records. 

In related news, Fannie Mae has appointed Anthony Moon as executive vice president and chief risk officer. In the role, which he will take on effective in the fourth quarter of this year. Moon will oversee Fannie Mae’s enterprise risk management, a role responsible for governance and developing strategy for the agency’s global risk management.

Moon also will be part of Fannie Mae’s management committee. He will report to the agency’s president and interim CEO, David Benson.

Moon is coming to Fannie Mae from Morgan Stanley, where he has been overseeing risk management for the lender’s Wealth Management and Private Bank division — which manages some $5 trillion in assets. 

“With nearly 30 years of deep experience in market, credit, operational, and compliance risk, Anthony [Moon] is well positioned to lead our risk-management strategy, a core function of Fannie Mae’s business and vital to maintaining the company’s safety and soundness,” Benson said. 

The post Fannie Mae picks winners of 4th RPL sale of 2022 appeared first on HousingWire.

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Another single-family rental (SFR) securitization deal sponsored by a large institutional player, Progress Residential, is slated to hit the private-label market this month, bringing the total securitization-deal count for Progress to seven so far this year.

This latest transaction, Progress 2022-SFR7, will be secured by a single $426.8 million fixed-rate loan backed by mortgages on 1,434 single-family rental (SFR) homes. The deal represents Progress’ 36th securitization to date, with a total note issuance of $20.5 billion, according to a bond-presale report by the Kroll Bond Rating Agency (KBRA).

The homes in SFR mortgage pool backing the note to be issued through the securitization are in 11 states, but the three largest state exposures account for nearly 76% of the portfolio, with Florida leading the pack (32.1%) followed by Texas (28.0%) and Georgia (15.3%). 

“The largest five exposures [at the metro level] account for 59.2% of the total property count and include Atlanta (235 homes, 16.4%) … followed by Houston (179, 12.5%); Jacksonville (168, 11.7%); Orlando (150, 10.5%); and Dallas (117, 8.2%),” KBRA’s presale report on the offering states.

The Progress Residential SFR offering is the most recent deal in a sector that has been red hot this year. The volume and number of SFR securitization transactions this year to date already exceeds total issuances for all of 2021.

Last year, there was a total of nine SFR transactions involving 30,471 income-producing single-family rental properties valued at $7.7 billion at issuance, according to deal data tracked by KBRA. Year to date through mid-September, KBRA has tracked 13 institutional-sponsored private-label securitization transactions involving 30,247 single-family rental-properties valued at $9.1 billion. 

These SFR securitizations are often referred to as Wall Street deals because they involve large corporations that own thousands of rental properties. The notes issued in the institutional SFR deals are typically collateralized by a single loan, which is in turn secured by a large pool of mortgages on income-producing single-family homes. 

Since the initial SFR securitization in 2013 through August of this year, according to a separate KBRA market-sector report, 16 sponsors have undertaken 113 SFR securitizations involving notes with a total principal balance of $69.6 billion. At issuance, the notes in those SFR transactions were collateralized by some 355,000 underlying properties. That doesn’t include Progress Residential’s latest offering, which would bump the deal count to 114 and push the note total past $70 billion.

“The business model for large-scale institutional ownership and management of SFR properties in the U.S. was born out of the Great Recession of 2008,” the KBRA presale report states. “… The sector’s inaugural transaction was eventually issued by Invitation Homes in November 2013. 

“The securitization, IH 2013-SFR1, was collateralized by a single $479.1 million floating rate loan secured by first mortgages on 3,207 income-producing SFR homes.”

The KBRA SFR sector report, called “SFR Securitizations: A Decade in the Making,” reveals that the bulk of the outstanding note issuance as of the end of August can be attributed to four issuers, “each of whom have more than $5 billion outstanding.” Those issuers, and their outstanding note balances from SFR securitizations, are Progress Residential, $14.1 billion; FirstKey Homes, $10 billion; Amherst Residential, $6.3 billion and Home Partners of America, $5.2 billion.

The 11 currently active institutional issuers in the SFR market owned or managed in total an estimated 390,000 properties as of the end of August, according to the KBRA sector report. Progress Residential and Invitation Homes led the pack at 83,000 SFR properties each, followed by American Homes 4 Rent, 58,700; FirstKey Homes, 44,500; Amherst Residential, 42,000; and Tricon Residential, 33,000.

Although the institutional SFR market has proven a lucrative play in recent years, there are headwinds on the horizon, according to the KBRA bond-presale report. The report points out that the performance of the sector historically has benefited from a period of strong economic growth marked by increasing rents and home prices.

“However, the asset class is now being subjected to economic and geopolitical disruptions,” the KBRA report continues. “Additionally, rising interest rates may put downward pressure on home prices, and inflation may put pressure on operating margins. 

“Should home prices, rental rates, and/or operating margins decline meaningfully, the sector could come under a stress that it has not previously endured.”

The KBRA SFR sector report states that if such a scenario developed, the workout could be problematic for those affected. “The customized nature of the loan and related collateral may limit the universe of buyers willing to purchase the loan in a distressed situation, and substantial workout negotiations may be required to restructure the loan,” the report states.

In addition, KBRA points out that the institutional SFR sector has come under increasing governmental scrutiny over concerns that it is impacting home affordability and prices in some areas of the country.

In fact, institutional players in the SFR market were recently the targets of a congressional hearing in which they faced accusations of gentrifying minority neighborhoods and allegedly displacing large numbers of people of color — Black residents in particular. 

“Securitized SFR homes are heavily clustered in the Sunbelt, which comprises the Southeastern, Southwestern and Western U.S. region, and in communities that previously experienced high foreclosure rates following the 2008 financial crisis,” a report introduced at the congressional hearing states. “For example, in the third quarter of 2021 alone, institutional investors bought 42.8% of homes for sale in the Atlanta metro area and 38.8% of homes in the Phoenix-Glendale-Scottsdale area.” 

In addition to the onset of volatile market conditions not faced by the institutional SFR market previously and the scrutiny at the federal level, KBRA’s sector report notes that there are headwinds developing at the local level as well for the industry.

“There also are some efforts at the grassroot level by homeowner associations and local municipalities on adding restrictions on acquiring and operating single-family properties for rental purposes,” the KBRA report states. “All of the above could result in a wide range of outcomes (legislative or otherwise) that could negatively impact the industry’s growth and/or performance.”

Institutional ownership in the overall SFR sector is estimated to represent only around 2% of the market currently, a market insight report from MetLife Investment Management (MIM) states. Most SFR properties nationwide are now owned by smaller mom-and-pop landlords,

MIM predicts, however, that institutional SFR ownership Is poised to expand significantly over the decade — assuming the sector can overcome the headwinds now on the horizon. That growth, if it materializes, bodes well for the growth of the private-label securitization market.

“MIM’s analysis indicates that simply moving institutional ownership of SFR from 2% today to 10% [of the investment-property market] in the future will result in a need for over $200 billion in incremental debt financing,” MIM’s market insight report states.

The post Progress Residential unveils 36th private-label SFR offering  appeared first on HousingWire.

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