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48 THE LONG- TERM VIEW OF UMBS Earlier this year, Fannie Mae and Freddie Mac along with the Federal Housing Finance Agency (FHFA) issued the first uniform mortgage-backed security (UMBS), a new security backed by mortgages guaranteed by either Fannie Mae or Freddie Mac. In a post by the Urban Institute's Karan Kaul and Laurie Goodman, Urban explores how the UMBS will benefit the housing finance system. According to the post, the single uniform security saves taxpayers money. e Urban Institute notes that mortgage-backed securities (MBS) investors strongly preferred Fannie's security, making it more liquid and more valuable than Freddie's security. When selling securities into the market, lenders received a better price for Fannie's securities, even when the loans underlying both securities had identical attributes. Additionally, the UMBS reduces inefficiencies, with the securities of either GSE now able to be delivered into a single security, doing away with the compensation for the difference to lenders in sales. e blog also notes that the UMBS "paves the way" for future housing finance reform, as not only a step forward for a single guarantor, but for multiple guarantors as well. e UMBS requires not only consistency across securitization practices but also substantial alignment with the credit underwriting, servicing, and loss mitigation policies that collectively determine how loans perform and prepay. "By reducing the significant competitive advantage that Fannie enjoyed over Freddie, it also helps open the way to additional competitors over time," said Kaul and Goodman. "It is still difficult to imagine how a new entrant would overcome the legacy players' enormous liquidity advantage, but moving to a single security helps ease that barrier." "In sum the UMBS requires substantial alignment among business policies and systems regardless of the number of guarantors." e Urban Institute calls the creation of the UMBS an important step forward in the current system. It not only removes an expensive inefficiency in the current system, but it also lays the groundwork for deeper structural reforms in the years to come. WHY BUILT-FOR- RENT HOUSING HOLDS STEADY Despite declines in other construction types, the number of single-family homes built-for- rent has held steady over the last year, according to a report from the National Association of Homebuilders (NAHB). According to NAHB's analysis of data from the Census Bureau's Quarterly Starts and Completions by Purpose and Design, there were 11,000 single-family built-for-rent starts for Q2 2019. e NAHB notes that this is lower than the 13,000 estimated for Q2 2018. "Over the last four quarters, 42,000 such homes began construction, which is equal to the prior four quarter starts total," said the NAHB. According to a post on NAHB's Best in American Living blog, renting by choice– instead of owning outright–is becoming increasingly popular among millennials. e blog said that this was where newly constructed built for-rent single-family homes came into the picture. ese homes, according to the blog, present millennials "with a terrific opportunity to live the American Dream– without the additional responsibilities and stress of homeownership." e blog indicated that one of the key reasons for the rise of these built-for-rent homes was diminishing affordability. e post, written by BSB Design, said that transitioning from a multifamily property to a single-family home was a "move-up" solution for families that desired "to have the flexibility to travel, live a low maintenance lifestyle, or avoid financial burdens." e share of built-for-rent homes rose following the recession, but the total number of single-family starts built-for-rent remains low in terms of the total size of the building market.CoreLogic states that the built-for-rent pipeline of single-family homes is considerably smaller than the single-family home portion of the rental housing stock, which is 35% according to the 2017 American Community Survey. e primary source of single-family rental homes is not construction but the existing housing stock, as 56% of the gains in the rental housing stock were due to increases of for-rent single-family homes from 2005 to 2015. Was the annual increase in the amount of equity in mortgaged real estate during Q2 2019. Source: CoreLogic Borrower Equity Update, Q2 2019 STAT INSIGHT 4.8%

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