C.A.R. Objects to Freddie Mac’s Plans to Guarantee Single-Family Rentals

The California Association of Realtors (C.A.R.) has indicated its objections to Freddie Mac’s plans to work with institutional investors looking to invest in the single-family rental market.

The Los Angeles-based C.A.R.’s stand comes in response to Freddie Mac CEO Don Layton’s comments that the government-sponsored enterprise is exploring this possibility, according to the California Realtors’ trade association. The Federal Housing Finance Agency, which is overseeing the GSE along with its associate Fannie Mae, has authorized these entities to explore single-family rentals on a “very limited basis,” Christopher Spina, a Freddie Mac spokesman, told CIO.

According to a report from The New York Times, Freddie Mac could provide up to $1 billion in financing to smaller investors who are looking to buy single-family homes that provide affordable rentals. Fannie Mae has already participated in guaranteeing a $1 billion Wells Fargo loan to finance single-family rentals for Invitation Homes, a firm backed by private-equity investor Blackstone Group, earlier this year.

“While C.A.R. is waiting on details, we are concerned with Freddie Mac moving forward to partner with institutional investors to use what is essentially a government guarantee to compete with homebuyers,” according to Geoff McIntosh, C.A.R. president. “While Freddie has hinted a potential deal may include affordable housing, the deal announced earlier this year by Fannie Mae did not, and there are no requirements that any future deals by the GSEs must promote affordable housing.”

Want the latest institutional investment industry news and insights? Sign up for CIO newsletters. 

Freddie Mac’s Spina clarified that the transactions the GSE is looking into are “entirely consistent with our mission of bringing liquidity, stability, and affordability to the rental market.”

The C.A.R. also believes that Fannie Mae and Freddie Mac already support affordable rentals with their multifamily-oriented programs. Their backing of the single-family rental market “forces homebuyers to directly compete with government-backed institutional investors who are buying a large portion of homes directly off the MLS,” according to the C.A.R.

However, according to Freddie Mac’s Spina, “These transactions will help us better understand the challenges and opportunities in this growing segment of the rental market. Freddie Mac is exploring single-family rental transactions to help address the shortage of affordable housing for low-income and working families. Our goal is to increase the availability of rental housing in communities across the country.”

Tags: California Association of Realtors, Fannie Mae, Freddie Mac, GSE

Following news of its 6.5% return in 2016, the Pennsylvania State Employees’ Retirement System (SERS) continues to ride positive waves, as the Department of the Auditor General’s audit report found the fund’s policies “thorough and providing a strong foundation for good governance.”

The year-long audit tasked SERS staff with 55 separate detailed requests from the audit team, in addition to participation in multiple meetings and a survey assigned to board members and designees.

According to comments in the report, SERS was praised for its draft Education Policy, suggesting it establishes a “solid foundation” to implement an education program. In July, the SERS board finalized the policy, which included provisions established in the newly enacted Act 2017-5 pension reform legislation.

The report also appreciated SERS’s reporting of its fund performance and the way it monitors its private investment managers. The audit also enjoyed SERS’ investing approach, reporting of investment expenses, its internal controls over investment operations, and the diversity of the portfolio.

For more stories like this, sign up for the CIO Alert newsletter. 

“While SERS’ reporting of investment expenses surpasses some peer public pension systems, the system has taken efforts to reduce these expenses over the audit period,” the report said. “SERS’ strategic approach to investing, specifically the key decision of whether it is most prudent to actively or passively manage portfolios within its asset allocation policy, appears to be reasonable.”

The audit also validated SERS’ pension forfeiture determinations in compliance with Act 140, which applies to all SERS members who commit certain crimes in relation to their employment.

Pennsylvania Treasurer Joe Torsella expressed his gratitude for the positive audit, most notably its notes on SERS’ $167 million payments in 2016 to high-priced Wall Street money managers for an investment strategy that underperformed.

“I thank Auditor General DePasquale for conducting a complete performance audit of now both of Pennsylvania’s largest pension boards,” said Torsella. “His report reflects my fundamental concern: SERS has historically paid a substantial amount in high Wall Street fees on investments that are underperforming. Like the Auditor General, I commend recent steps SERS has taken to reduce fees while urging the system to accelerate and intensify those efforts.”

Tags: audit, Pennsylvania, Pension, SERS