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Commercial Department: Q&A: Jeffery R. Hayward, Fannie Mae: April 2015


Q&A: Jeffery R. Hayward, Fannie Mae

Jeffery R. Hayward, executive vice president, head of multifamily, Fannie Mae

The multifamily outlook for 2015

Multifamily housing has surged in the wake of the housing crash. Homeowners displaced by foreclosure and millennials unable to afford a home turned to rental housing as an affordable and stable alternative to buying. In turn, rents have skyrocketed in many U.S. cities. According to the U.S. Census Bureau, vacancy rates were near 7 percent by the end of 2014, a low not seen since the mid-1980s. Fannie Mae’s Executive Vice President Jeffery R. Hayward sees continued strength for multifamily in terms of refinances and developers looking to build or rehabilitate properties, or expand into areas like student and affordable housing. We spoke with Hayward to learn more.

What will Fannie Mae’s focus for multifamily be in 2015?

We really want to focus on where our lender partners want to go. They are at the front of our origination space, and we are working with them. Whether it is geographic, senior [housing] or small loans, we’re going to go wherever our lending partners go.

What types of multifamily properties are demanding financing right now?

In certain markets, we are certainly seeing a lot more new construction. The reason for that is, No. 1, interest rates are so low, and No. 2, demographics are changing in certain markets where it makes sense to build new. They are building for a specific kind of person who wants small units near transportation. There is lots more new construction in pockets — Austin, Texas; Houston; Raleigh-Durham [North Carolina]; Washington, D.C.

What multifamily property types could do with more financing attention right now?

There are 100,000 properties that become obsolete in any given year. There is always going to be a need for someone to buy those units, rehabilitate them and bring them back up so they are useful or demolish them and build a new apartment building. There is always going to be an opportunity every year to replace the units that go away as a result of obsolescence. About one-third of Fannie Mae’s multifamily business is in acquisition, including renovation.

Do you see that increasing?

We see all kinds of different types of acquisition, where the borrower is buying the property and is going to put several thousand dollars into each unit, or where a developer is going to buy a property and build a new building on the site and finance it once the construction period is over. So, we see all kinds of things. I do not know if there is one trend. Fannie Mae saw a $477 million increase in financing for student-housing projects in 2014.

Where is demand for that type of multifamily coming from?

One of the reasons why you’re seeing an increase in student housing is that you have professional operators coming in. The college is no longer doing that operation; they are essentially contracting it out to people who can invest in it and have a propensity to do it right. We are participating in that market as these operators come about. That’s a trend you see at the university level; they just do not do it themselves anymore.

These operators also do traditional conventional developing, and some of them do affordable housing, as well. Some of them have been in student housing all along and chose to come with us this year. You are going to see [this trend take place] in big state schools. We typically look at [projects] where there are over 10,000 students. Fannie Mae foresees strong commercial loan refinance activity in 2015 and beyond.

How do you think interest rates rising this year will affect that business?

It is totally interest rate dependent. If rates go up, [refinances] will change. I would parse this, though: Most of our loans are 10-year fixed rate with a prepayment penalty that stops after nine and a half years. Those loans are going to have to refinance at some point. That is going to happen no matter what the interest rate environment is because they have to. There are a group of loans that are two, three [or] four years out that are having to refinance, and it’s really just the math of when rates are this low. Economically, it’s a better transaction for you to pull it forward and refinance now.

Jeffery R. Hayward is in charge of Fannie Mae’s multifamily division, one of the biggest sources of capital funding for rental and multifamily housing in the U.S. Hayward has been with Fannie Mae since 1987 and was formerly in charge of the enterprise’s community lending business. Before Fannie Mae, Hayward worked in leadership positions at private mortgage companies and community banks.


Neal McNamara was a chief reporter with Scotsman Guide Media. For questions about this article, call (800) 297-6061 or e-mail

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