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48 CAN LOCAL GOVERNMENTS IMPEDE HOUSING MARKETS? Federal and local government agencies have added significant building costs that did not exist as recently as 15 years ago, which has had an adverse effect on many housing markets, according to a recent survey of more than 100 builders by John Burns Real Estate Consulting ( JBREC). e survey found that in many instances, the government added these extra costs in order to protect the environment and improve the surrounding area for existing residents. "While these are noble goals, builders have to charge more for new homes—or simply not build homes in many instances," said John Burns, CEO of John Burns Real Estate Consulting. Analysis of the top 33 markets in the country found that the number of new home communities has increased by only 4 percent in the last year, according to Burns. At that pace, the number of new homes permitted will not reach 1.1 million until 2023, which is consistent with historical averages. While the survey found there are many reasons why the recovery is not stronger, local government was the primary reason that volume recovery was stronger in some areas than in others. e survey found that government attitudes toward housing tend to be either friendly and affordable, or unfriendly and unaffordable. Areas where builders can quickly build to meet demand like Texas and Georgia, which are well-known for business-friendly environments, fit into the friendly and affordable category; particularly Texas, which has opened up huge amounts of land for development in the last decade due to massive investments in freeway infrastructure. Texas also features new homes near employment centers that tend to be cheaper than in most areas even when home price appreciation is considered. Meanwhile, states like Virginia, Illinois, New Jersey, California, and Washington (excepting downtown Seattle) are well known for being difficult for builders, regulation- wise, according to JBREC. ese places feature areas that are highly desirable to live, but they have become very expensive, and on top of that, demand is outpacing new construction, JBREC reported. "e bottom line is that there is a huge correlation between government attitudes and new home construction and prices," Burns said. "We strongly believe that the large, affordable markets will grow faster than the other markets." FANNIE MAE UNLOADS MORE DELINQUENT LOANS While HUD recently proposed changes to its distressed loan sale program allowing a "preferential bidding" option to involve more non-profits, Fannie Mae still sells its non- performing loans to the highest bidder. Fannie Mae announced the winning bidders for its sixth non-performing loan sale which includes approximately 9,300 loans totaling in $1.5 billion of unpaid principal balance to be divided among six pools, according to an announcement from the GSE. e winning bidders for the transaction are LSF9 Mortgage Holdings, LLC (Lone Star) and PRMF Acquisition LLC (Neuberger Berman), with three pools going to each bidder. ese transactions are expected to close on August 24. Fannie Mae began marketing these loans to potential bidders on June 16, 2016, collaborating with both Bank of America Merrill Lynch and CastleOak Securities, L.P. e Federal Housing Finance Agency announced on April 14, 2016, changes to its requirements for sales of non-performing loans by Fannie Mae as well as Freddie Mac that add to the requirements originally announced in March 2015. ese requirements, which apply to this particular Fannie Mae non-performing loan sale, encourage sustainable modifications which have the potential to provide additional borrowers the opportunity for home retention. e loan pools awarded in this most recent transaction are divided into two groups. Group 1 Pools include 4,537 loans with an aggregate unpaid principal balance of $746,438,433, an average loan size at $162,964, a weighted average note rate sitting at 4.51 percent, a weighted average delinquency of 34 months, and a weighted average broker's price opinion loan-to- value ratio of 67 percent. Likewise, the Group 2 Pools include 4,721 loans with an aggregate unpaid principal balance of $759,860,824, an average loan size of $160,148, a weighted average note rate at 5.24 percent, weighted average delinquency at 27 months, and a weighted average broker's price opinion loan-to- value ratio of 82 percent. According to the announcement, the cover bid price for Group 1 is 78.2 percent of UPB (52.2 percent BPO) and is 71.0 percent UPB (58.0 percent BPO) for Group 2. Six percent of the loans refinanced through HARP had a loan-to- value ratio greater than 125 percent as reported by the FHFA. KNOW THIS

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