Key Takeaways: Yesterday Fannie Mae announced it would extend its multifamily forbearance program (see HERE), which was set to expire June 30, by three months and for the third time since it was originally set to expire at the end of 2020. Under the program landlords with FNMA-sponsored MF loans are required to suspend evictions for tenants experiencing pandemic-related financial difficulty, as well as to inform all tenants of available protections including payment plans, suspension of late fees and providing 30-day notice to vacate.
Just reading the tea leaves a bit, and given FNMA's government affiliation, we would say this makes it incrementally more likely that the CDC moves to extend its eviction ban upon expiration on June 30. Recall the ability to evict non-paying tenants is part of our long thesis on AMH, namely that expiration of the ban would allow AMH, INVH and other landlords to begin churning out non-paying tenants and lower bad debt expense over time by roughly ~150-200bp, which would provide a significant tailwind to SSRev growth. As a reference point, we had assumed that bad debt begins to normalize for AMH and INVH beginning Jan. 1, 2022, so any ability to add rent-paying tenants before then would be "gravy" to the thesis and just accelerate the path to full earnings power.
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Rob Simone, CFA
Managing Director
@HedgeyeREITs