Berkadia recently held their BeEngaged Quarterly event, bringing together industry experts to discuss the current market outlook and explore adapting technical solutions. The event featured speakers including SVP of Asset Management, Zenzi Reeves, who shed light on Affordable Housing initiatives, SVP Head of Fannie Mae Originations, Emily Schultz, who provided insights on leveraging the offerings of Government Sponsored Enterprises (GSE), and Senior Real Estate Analyst, Andrew Wood, who dove into the world of HUD, specifically originating loans for clients through the 221(d)(4) new construction program.
One of the key challenges highlighted by Zenzi Reeves is the ongoing Affordable Housing Crisis. A significant number of households, approximately 21.4 million, were classified as cost burdened, with over 30 percent of their income going towards rental housing. Alarmingly, 11.6 million households were categorized as extremely cost-burdened, with 50 percent of their income on housing expenses.
Efforts are being made to address the affordable housing issue, including the construction and preservation of affordable housing units across the country. While experts like Zenzi Reeves are working to expand the availability of affordable housing and increase supply, there are significant challenges. The process of structuring affordable housing deals can be complicated and time-consuming, often taking three to five years to complete, and long-term commitment from various stakeholders. Factor’s such as land costs, rising insurance rates, labor shortages, and material costs contribute to these challenges.
The HUD 221(d)(4) New Construction program is a unique financing option that provides borrowers with a construction and permanent loan in a single package. The 221(d)(4) program aims to bring new units to growing markets. To that end, much of the work Berkadia FHA/HUD does with clients is focused on understanding and clearly defining what is driving growth in a market and pitching to HUD why a market can support new multifamily units.
Berkadia is continually enhancing its systems capabilities to support Berkadia’s FHA construction platform. The application of technology has continued to play an important role at each stage of the loan process. For Berkadia, it begins with how we analyze market growth and pinpoint demand as we prepare concept memos to pitch new construction projects to HUD. During the underwriting stage, technology has simplified the way we collect due diligence for the loan application we submit to HUD. After closing, when HUD initially endorses the loan, new technology has streamlined the process for our borrowers to receive funds during construction when time is of the essence.
The GSEs – Fannie Mae and Freddie Mac – are focused on meeting their Mission-Driven Business (MDB) goals. Both GSEs have made affordable and workforce housing a priority over the past few years and Berkadia has been at the forefront of new products and programs including Sponsor-Dedicated Workforce Housing (SDW) and Sponsor-Initiated Affordability (SIA) products. Additionally, Fannie Mae and Freddie Mac are focused on the chain of control for financing documents and are eliminating suspicious activity as a whole.
In the real estate industry, there is a growing focus on implementing data and innovative technologies to improve efficiency, reduce costs, and generate more profit in the end. If applied correctly, technology and data could reduce the timeframe of deals closing and construction and prevent delays.
Artificial Intelligence (AI) has proven beneficial on the operations side for property owners and managers, enabling efficient review of materials. OCR has been particularly impactful in the affordable housing space, applying the ability to automatically store the thousands of pieces of paper received each month into a system bringing efficiencies and scalability. Additionally, 3D printing has saved time in affordable housing deal process, indirectly reducing costs, by minimizing construction interest payments.
Technology and data should be implemented and applied in a unique way for each of the development/construction processes including front-end, debt, and mortgage underwriting, high-level market and location analysis, supply and demand dynamics, and processing and underwriting. Berkadia FHA/HUD uses Pro Deals, a platform that streamlines the required forms and various documentation for HUD loans, simplifying the submission process.
Implementing technology in deal closings, new developments, and constructions is crucial, as it directly impacts profitability by reducing turnaround times.
Berkadia has actively listened to clients and utilized technology to streamline deal lifecycles. These technological advancements have helped investment sales advisors and mortgage bankers to be trusted advisors and partners.
If you would like to find out more information / attend our quarterly event, please contact Rachel Startzel: Rachel.Startzel@berkadia.com.