Housing Opportunities Emerge

With the new threshold test for bond-financed housing credit properties lowered to 25%, allowing additional buildings financed with tax-exempt bonds to qualify for housing credits, how are issuers preparing for new housing opportunities? What challenges does the sector face?

Transcription: 

Geoff Proulx (00:08):
Great. Hey everybody and thanks all for coming in today and for listening to the panel on housing. We're not going to do this with slides today. It's going to be more of a conversation and this is an infrastructure conference. So maybe the question about why is housing relevant. I think many of you know that housing is a major user of private activity bonds and in the last two years really the housing finance agencies have maxed out on their usage of PABs to the tune of last year. Total housing issuance was 49 billion, pretty much divided up into two major business lines, single family and multifamily, the state housing finance agencies, and we have representatives here from MassHousing, Rhode Island Housing and New York Housing and Community Renewal, all of which have been agencies since the sixties and seventies. So long-term financing for affordable housing for single family and multifamily.

(01:18):
For those who don't know, the single family programs are based around first-time home buyers and multifamily is designed around low-income housing tax credits for the most part. As I mentioned, agencies have maxed out on private activity bonds. Last year, total volume 49 billion, 75% of that or so was tax-exempt. So that equates to about 37 billion. So in most states, the HFAs really are using the lion's share of PABs. There's been a bunch of things that are going on in the market, one of which is the One Big Beautiful Act changed how funding for multifamily LIHTC deals is going to go forward in 2026 and beyond. Basically what happened is the rules stated that 50% of the development costs of a LIHTC deal has to be financed through PABs; that was reduced to 25%. So in theory we're going to talk about that in some detail.

(02:28):
You could double the amount of LIHTC deals that are done and might use less volume cap as well. So we're going to focus on that. We're going to focus on how the state HFAs have really been putting out a lot of bonds in the last couple of years. That 49 billion total for last year and we're on the same pace—a little bit higher this year than last—isn't always the case. So housing issuance is very much dependent on the interest rate environment, particularly single family, which is somewhat countercyclical to rates. Mark Teden will talk about that in a little bit. So we're going to focus on that from the lens of do we think housing is going to be using a lot of PABs next year, how the multifamily production may be impacted by the new change in basis for LIHTC deals? And then we're going to get into a focus on, because the conference itself is focused on infrastructure resiliency and energy retrofits, and tying it all up with some focus on the legal side. So turning to Tom first, and I mentioned countercyclicality for single family and also how the interest rate market impacts housing, we thought it would be good to just give a little bit of context on the ebbs and flows, if you can talk about that from Rhode Island Housing's perspective. Is this working? Yeah, just lean into it.

Thomas McNulty (03:59):
Yeah. Okay. Alright. Good morning. Thanks Geoff. Just by coincidence, yesterday there was an article in the Boston Globe—before I get to the rate part of it—talking about trying to wean people, the empty nest problem, that the tax code hasn't been changed since 1997. So if you live in Boston or a suburban area, and if this is more of a national conference, this is a lot of parts of the country, you're subject to a pretty significant capital gains tax. So if you owned a house and it was worth say a million dollars and you paid it off and you were a married couple, if you move into the city and sell that place, not only you're probably going to get a smaller place, you're going to be subject to maybe a six-figure capital gains tax. So that's a problem and that's a log jam and that's continuing to be an issue.

(04:55):
In terms of rates, I just thought it would be instructive to talk about how we got where we are today. So briefly, if we go back to the financial crisis in December of 2008, the Fed rolled out a kind of novel policy called quantitative easing or QE. All that means is they were going into the market and buying 40 billion of treasuries and, more for our purposes, 40 billion of mortgage-backed securities. So by doing that, they artificially suppressed interest rates for quite a bit. So if you looked at the 30-year fixed-rate mortgage at the beginning of 2021, it was 2.75, and then September it was 2.90 and it finished the year at like 3.10. So we had a whole year of interest rates at such low levels that pretty much everybody refinanced, on top of perhaps the capital gains issue.

(05:54):
And the other thing they said, I think I'm okay with my house right here. So that's one of the things that's really kept supply down as well. And there were a few other things going on in the economy at the same time. So if you look back to 2021, GDP growth was like 5.7%, which is for those who don't follow that closely, anything say three or above is really fantastic and close to six is phenomenal. But what was going on is the Fed was continuing to suppress interest rates all through that period in 2021. And the other thing that obviously happened was there was massive amounts of fiscal stimulus. We began the year with a consumer price index at 1.4%. By the end of '21 it was 7%. When the Fed finally stopped QE in March of 2022, the CPI was at 8.5%.

(06:51):
So you had a perfect storm of all these factors which drove interest rates up. After that, the second half of '22, by the fourth quarter of '22 rates were above 6.5%. We went from below three in a year and a half to above 6.5. And that really crushed the mortgage market, except for affordable housing, which I'll talk about in a minute. So those factors really got us to where we are right now. So Geoff mentioned affordable housing. So I think we're an area that really benefited even with rates going up and obviously the things I just outlined regarding the CPI and the inflation—everybody here has either lived it or has someone in their family who can't get a house, the rent's too high.

(07:42):
So especially younger people, saving money to buy their first house is a huge problem. So we offered down payment assistance programs, which we can talk about if you want, but pretty much people can get into a house with no money down and if you're a first-time home buyer, it's been phenomenally successful. We grabbed a decent amount of market share in Rhode Island and I'm sure that's the same with HFAs throughout the country. So looking into 2026, I think it should still remain strong. We are getting good participation for first-time home buyers. So I think although some people, maybe a traditional mortgage banker, had some trouble in '22 and '23 as rates went up and there was nobody refinancing, housing agencies, us in particular, have done quite well and we're fairly optimistic about the future moving into '26.

Geoff Proulx (08:44):
So Tom, rates have been relatively high for the last two years and volume in housing has been just about 50 billion with the Fed looking to cut rates. Any thoughts on that? Do you expect mortgage rates to go down?

Thomas McNulty (09:02):
Not really. I think, again, this is opinion. I think if you went back and you looked at September of '24, the last time the Fed cut rates 50 basis points, and within a few months the 10-year treasury had increased 100 basis points. What that means is all the mortgage product is pretty much priced off what the treasury market does. So they're starting to cut rates now, but right now they cut on the 17th—the Fed cut 25 basis points and the 10-year treasury bill moved. In some ways that's good news because we didn't have the reaction last year. People, the Fed generally tends to control the shorter end of the bond market, the fixed income market, money markets, etc. But the longer end of the market is controlled by the bond vigilantes; that's sovereign wealth funds, pension funds, everybody who has to own treasury.

(10:02):
So if they don't like the yield, they're going to demand more. So I guess the long answer to your question is it depends on jobs numbers. We've had some massive down revisions for job numbers. If that stays weak, if inflation gets under control, yeah, we could see rates get a little bit lower and hopefully if they're 6.25 today, we'd like to see them at five. But this is kind of a normal rate environment—2.75 for a 30-year fixed-rate mortgage is not a normal rate environment. So I think we'll be here and we'll be kind of range bound, I would say.

Geoff Proulx (10:38):
And the room is quite interested in private activity bonds. So question just as a litmus test on housing volume for 2026: do you think Rhode Island Housing's volume is going to be similar next year to what it is today?

Thomas McNulty (10:53):
I do. In '22 and especially in '21, we did phenomenal volume. A lot of that was interest rates, but we've been pretty steady the last few years. So I think, and not to get too technical on this, but there's a concept called volume cap. That means we can only issue so many tax-exempt private activity bonds. The last couple of years we've been issuing a lot of taxable bonds, but the markets folks like Morgan Stanley have been very good at marketing those for us and that's gone well. The rates aren't as good as we'd like them, but I don't think the volume cap issue is going to hold us up this year and hopefully we get rates a little bit lower and it seems like house prices even in this part of the country are stabilizing and dropping a little bit. So we're hopeful that way. So we want a five handle on the mortgages and lower prices and we'd love it.

Geoff Proulx (11:53):
Great. Thanks Tom, and certainly appreciate the plug for Morgan Stanley. Alright,

Thomas McNulty (11:58):
It's the least I could do.

Geoff Proulx (11:59):
Turning now to another big driver of the use of private activity bonds for next year is just what I was talking about at the onset with the very significant change under the One Big Beautiful Act on multifamily basis. So MassHousing and New York State HFA are major LIHTC funders. So we'll turn to Mark first to talk about what you do at MassHousing and what you think that impact is going to be.

Mark Teden (12:28):
Great, Geoff, thank you very much. First of all, it might be good just to take a look a second to see how capital stacks add up on an affordable housing deal and the averages I'm about to espouse belie a wide range of activity, but roughly one third of our deals are funded with federal LIHTC proceeds, one third with permanent debt and then one third with a range of subsidy, which in this state the state has a very robust housing subsidy function, multiple soft debt programs, a state LIHTC program. We also count federal and state historic tax credits in that general subsidy bucket. And then there are also grant programs for infrastructure and particularly as it relates to housing development. One thing that has happened over the last five years, typically a 4% deal would close with five or six sources of capital in them; today if that number is 15, it's a light deal.

(13:30):
Typically it's around 20 different sources of capital now coming together to make a deal happen for deeply affordable projects that can carry less permanent debt that needs more subsidy, perhaps even more sources for deals that have significant rental subsidy. Those deals can carry more permanent debt and perhaps less subsidy. As Geoff indicated, the tax act reduced the requirement of funding TDC from 50% to 25% with tax-exempt debt. What that means at the deal level is—well, there's a few implications that are remaining to be seen—but at the individual deal level, it's less about impact there. From the issuer level, we now have effectively twice the amount of volume cap that we had. And so our job, we continue to be constrained as several states are—about a third I think—which means we have more deals to fund in the pipeline than we do cap allocated, which is an IRS allocation to the state.

(14:47):
And so our job is to arrange the pipeline in order, generally fitting the state's priorities of its subsidy and the award dates that it has granted subsidy to projects. But to allocate the scarce volume cap resource among competing deals, deal structures under the 25% test won't have to change too much. Although typically when we would come in with our 50% money, if we were the forward lender rather than the construction and permanent lender, our money coming in would be enough to pay off the construction loan. If coming in at only 25%, that is not the case now. So probably LIHTC equity will have to be accelerated. That will have an impact certainly on the IRR calculation and maybe pricing. Potentially significant impact on LIHTC pricing with a 50% test dropping to a 25% test, it is a theoretical doubling of available credits for sale. We have yet to see any significant deterioration in price, although many of the deals we're looking at right now had their commitments for equity back in the spring. And so I think next year that'll be an interesting observation for us all to make. As far as volume goes, we expect there's no part of the affordable housing system that can double its work overnight. That goes from lenders to sponsors, project managers, maybe a little bit of increasing slack in the construction area right now, although not a lot, all the way down to surveyors and appraisers. Nobody can just turn the switch. So we think '26 we will do an increase in deals, but we think '27 and '28 will really start to ramp up to the potential of what the act is bringing.

Geoff Proulx (16:55):
And Mark, you run the program side at MassHousing, so you're involved with all of the developers in the Commonwealth. Can you comment on how they've reacted to this and whether they feel like it's going to be a big boon for them? What are the thoughts?

Mark Teden (17:15):
Well, it's an optimistic group, Geoff, and so they expect that all of their deals will close next year, but they're having trouble closing their deals this year that we remind them because with 21 sources of capital, it's just very difficult to move deals quickly through a pipeline. Everybody expects 2026—I'm not joking about the optimism, but I am joking about everybody thinks they'll get all their deals done next year. Everybody recognizes 2026 will be a transitional year and figuring out what this means in the practical sense. The other thing that impacts this is again, theoretically we could double the number of deals, but if they require state subsidy, that means the state also has to double its subsidy package and that is still being thought through right now. So '26 is a big transitional year, as I said, '27 and '28 probably start to figure things out.

Geoff Proulx (18:16):
Great. And New York State HFA and State of New York Mortgage Agency year in and year out is one of the top issuers of housing bonds in the country and one of the top issuers of bonds in the muni market. From the perspective of New York HFA, Mark Price, what would you say the impact to the deals is going to be of the multifamily basis change?

Mark Price (18:41):
Thanks Geoff and happy to be here today to talk about all these different things. You'll forgive me or appreciate me when I refer to the act, I'm going to say HR 1. But I think just as Mark mentioned, we can't double the number of deals or transactions that we are going to work on in a year. So again, all the different parts of the delivery chain and spectrum, there's just not enough capacity to double that. We think though we could probably do somewhere between 20 to 30% more next year. And I think we agree '27 and '28, we'll step into it a little bit more. So I think from a volume perspective, Mark talked about sort of an average capital stack and I think you were talking about once you get past construction in perm phase, but we're at, in terms of bonds that are left in our permanent funding sources, we're typically around 10 to 20%.

(20:12):
So the payoff of—under the 50% test—the payoff of let's say 30% of those bonds, it's coming from tax credits similar to what Mark had mentioned. So I think what we're going to see, if we're increasing the number of deals that we're going to do, there's going to be some sort of gap financing that needs to be identified. So if we were funding 50% of aggregate basis with tax-exempt volume cap bonds, and now we only need to do 25%, and oh by the way, we always issue slightly more to have a little bit of a buffer because you don't want to get to the end of the project and not have met the requirements of the test. So we are probably going to try to underwrite deals under the new test at around 27 to 28% to give us that buffer. And like I said, in perm we're typically at 10 to 15% left in bonds in the capital stack.

(21:32):
So really what that means is we're going to be at 10 to 15% we need to make up from somewhere. Obviously subsidy is a huge part of the capital stacks in our multifamily deals. So similar to MassHousing, we put a lot of different line items in our transaction. And so will there be some changes in subsidy timing perhaps? But I think a lot of folks are looking at a couple of different gap fillers if it's not subsidy, and those gap fillers are going to be either taxable bonds—so that's always a possibility—or in the case of New York, we've always had a very robust recycling program. And so bonds that were subject to volume cap, we usually use those during the construction phase. We do some sort of short-term bond structure. We typically do the fixed-rate put bond; when those bonds get paid off, usually from proceeds of tax credit equity coming in, we can recycle that volume cap, those volume cap bonds, and we can redeploy them into other projects.

(23:02):
We actually share our recycling capacity with our friends downtown, as we say, the New York City Housing Development Corporation. They're sort of the city analog to what we do at the state level HFA, and for a very long time we have shared recycling capacity. And so I think what we'll see as far as gap filler goes, we can use some of these recycled bonds. We'll also see some taxable bonds. So I think if we are doing 25 to 30% more transactions and we have some gap filler of 10 to 20% that we're going to need to find out, I think we end up with maybe 10% more in bonds and it will be a mix of recycled bonds which are tax-exempt and some taxable bonds. So I think in the multifamily space we might start to see a little bit of an uptick of taxable issuance, which you don't tend to see that much, at least under 100% affordable programs.

(24:23):
And because we can do twice as many transactions with the same amount of volume cap that we've been getting, folks have talked about being volume cap constrained. New York is certainly one of those states that is volume cap constrained. And we have as a matter of strategy and policy used most of our volume cap at the state level for housing purposes on the multifamily side and not single family side. I think as we are transitioning to doubling the capacity on the multifamily side, we can shift some of that volume cap over to single family. And for all the things that Tom talked about, I don't see issuance on our single family side going up much, but I think we'll see a shift in mix again where we had to do a substantial amount of taxable debt on our single family side, now we can shift some volume cap to single family. And so I think the amount of taxable we will do going forward will come down a little bit. Very long answer, but hopefully that was—

Geoff Proulx (25:43):
Great answer. And just contextually for the room and thinking about if there is extra volume cap that's being generated because the need for multifamily production is less and the thought that it goes over to single family, that space in the single family arena—and I think I mentioned at the beginning that total volume last year was 49 billion. About 75% of that was tax-exempt and the balance was taxable. So you're talking about 12, 13 billion of taxable bonds issued last year in housing, and that was almost entirely for single family production and it's as a result of scarce volume cap. So those single family deals were done on a combined basis, so blending taxable and tax-exempt bonds to get the first-time home buyer loans out. So the thought would be is there going to be a lot of extra volume cap after that net? What do you think, Mark?

Mark Price (26:49):
So as I don't get in trouble, I try to stay in my financing lane at the agencies and let the policy wonks do policy wonky things. I think that will be determined going forward. We have allocated more volume cap to single family this year than we typically have, starting off with a small amount. And I think next year we will do probably even a little bit more for single family, but we'll have to see where we end up steady state in terms of that rejiggering of the volume cap. And just by way of numbers, so folks understand the formula, it's a per capita formula that's used for volume cap for the states, and I believe it's $130, the greater of $130 per capita and 388 million, something like that. So New York State gets about two and a half billion a year. New York State HFA, we use about 1.5 billion. That's on the multifamily side. And then SONYMA, State of New York Mortgage Agency, we use 200 million on a single family side, so that's 1.7 billion. And our friends downtown use a substantial amount as well. So most of the volume cap that New York State is getting from a policy perspective is directed towards housing.

Geoff Proulx (28:33):
Great. And I think that that really covers what for this year is going to be a monumental change in the housing industry with the shift on multifamily basis, both from the perspective of development and origination and capital markets. Shifting over to another major topic in housing is resiliency. We're seeing different efforts in different parts of the country to focus on energy efficiency. I mentioned at the onset that the agencies up here have been around since the sixties and seventies and have been producing affordable multifamily rental for some time that comes along with maintenance of those buildings and changes in the overall design. So New York State HFA and HCR have really been focused on this. Mark, do you want to talk a little bit about your approach to energy retrofits and whatnot?

Mark Price (29:31):
Sure. So a couple things just from a mission perspective. New York State Homes and Community Renewal, we build, preserve, protect affordable housing and increase home ownership throughout the state. That's our mission. And so if we focus in on the first part of that mission statement: build, preserve, and protect. So the preserving and protecting piece of that on our multifamily side really is looking at the affordable units that we already have, preserving them, protecting them. And if we also look at the dedication and commitment by the state on climate and the environment, we can go back to 2019 when the CLCPA, which is the Climate Leadership and Community Protection Act, was put into place with a commitment to reduce greenhouse gas emissions by 85% by 2050.

(30:39):
That is going to take a lot. And so in terms of the stock that we already have, we imagine, and there is a lot of retrofitting that's going on—the state tries not to do unfunded mandates. And so we do have a program that we use at HCR called the Clean Energy Initiative. We don't do this by ourselves; we partner with another state entity, New York State Energy Research and Development Authority (NYSERDA). And this program, the Clean Energy Initiative, allows us per term sheet to put in up to $35,000 per affordable unit of subsidy into transactions where it's a preservation type of transaction doing some sort of retrofit. And the two major categories are looking at heating and hot water. So electrification of those two things are the two major goals. There are some other ancillary things that can be done there, but it's a very generous subsidy, up to $35,000 per unit. And we have appropriations in the $100 million range that could get re-upped at some point and it could be a 50 basis point upfront fee, but other than that, it's a 0% interest subordinate loan.

Geoff Proulx (32:20):
And it might not seem it, but the energy retrofit resiliency topic is directly tied to the change in basis for multifamily in that the allocation of private activity bonds and low-income housing tax credits is a super competitive process and it's done pursuant to state plans that are upgraded periodically. It depends on the state, but in each of the three states up here today, the allocation is hyper-competitive and involves scoring around energy efficiency components, resiliency and different types of things. Developments in Mass., really what has happened over the past five or six years is that no LIHTC gets allocated to a project unless it has heightened energy efficiency like passive house or LEED or some other type of certification or really significant energy efficiency metrics. If we are changing the basis and we expect to see a whole bunch more multifamily deals, Mark Teden, do you expect any kind of changes on energy efficiency and the awards of LIHTC in Mass.?

Mark Teden (33:42):
No, you mentioned passive house. That has really become the standard. It's almost as if it's not passive house if you don't submit your pre-app to the state for funding. The City of Boston—the acronym is BERDO, and it just escaped me what it is—but they have their own requirements. They happen to actually put money into deals to back those requirements. Despite the reduction in federal sources, this state is fortunate. We have our state Department of Energy Resources which has a grant program for multifamily developments that they'll put in money to support these required measures. MassHousing manages the state's climate bank, and we're doing a pilot program right now where we're putting money into deals that do not really want to wait in line to get volume cap and tax credits. And so we're putting significant subsidy into some of these deals that really need the physical upgrade, but the standards for that upgrade will be significantly environmentally enhanced.

Geoff Proulx (34:59):
Great. And with all of these changes and the focus around multifamily basis changing, all of the things that we're hearing in the news on things like coming out of conservatorship for Fannie and Freddie, there are some shifts in how we're looking and thinking about disclosure for housing deals. Troutman Pepper is one of the largest bond counsel firms covering housing in the country and thought it would be good for Jen to comment on those things.

Jennifer Mendonça (35:31):
Yep, sure. I would say one thing we've learned over the last nine months for sure is that nothing is certain. And with all of that unpredictability coming out of Washington—and this really hits not just the housing sector, but all the areas that we've been talking about—as issuers are doing their deals, you need to be thoughtful about your disclosure and not just dust off what you already have, but really think a little more broadly about the impacts at the macro level. Topics like the proposed exit from conservatorship of Fannie Mae and Freddie Mac, or a threat to yank elite institutions' 501(c)(3) status, or a 145% tariff on Chinese goods are all certainly headline-grabbing. Determining whether disclosure of those things should end up in your offering document is a more nuanced discussion and thought process that you should be going through. As I know you all know, but just as a reminder, issuers need to ensure that your offering document is accurate, complete, and doesn't misstate something or leave something out that might be material to investors.

(36:53):
And so there's this line that we walk around how much needs to be disclosed about global uncertainties that some would argue everyone knows about because it's all in the news. And really what I would say is to be thoughtful about what the unique impacts are to your organization, whether it's financial impacts, operation impacts, or the ability to complete your project that you're trying to finance when thinking about whether disclosure is warranted. So a couple examples: tariffs. As we all know, tariffs impact cost of goods, it's impacted supply. Just the cost of the deal, construction contracts—which contracts do you currently have in place, which are still being negotiated? How could it impact your timeline? Do you have other funding sources available if it turns out that something is withheld or there's a timing issue? And so the tariff impact across the sectors, not just disclosure around the uncertainty of tariffs, but bringing it back to the issuer in terms of a statement about how or why this is something that's important to you as an organization, is what becomes more meaningful to investors.

(38:22):
Federal policy uncertainty, I mean, again, the possible curtailment of federal funding for any number of reasons. Again, bringing that full circle around to how could that impact this project that you're trying to finance or the timing, or what happens if that funding goes away—what other sources are available? Immigration enforcement actions, if the labor supply is somehow related to that. So you really need to be thinking on a macro level about what the potential impacts could be.

(38:58):
But again, as we've watched this all play out, it's a reminder about how to thread the needle around that uncertainty because drafting disclosure that just generally talks about how tariffs will raise costs and there's uncertainty around federal funding without bringing it back, I'm not sure how much value that adds. Some best practices that we've seen emerge: I kind of think if you look at what happened in the higher ed sector starting in February and what disclosure looked like then when there was first one executive order and then another executive order... some of the disclosure then got really detailed around what the executive orders said, and I think it was before we realized that they would just keep coming and there would be more and more of them and maybe they'd about-face or say something else. So things started really specific, and then I think as it morphed, we realized that getting into the really specific language of the executive orders is not particularly helpful.

(40:01):
And not only that, but you might get yourself in a situation where what if then another executive order comes out that's totally opposite of what we disclose now? Do we need to supplement the offering document? You don't want to be stuck there unnecessarily. So I think just really thinking about how those market uncertainties impact your project, your operations, your finances, and bringing it full circle is much more helpful than doing just a global broad-based disclosure. And it's just a reminder too that when you're doing your disclosure, as I touched on at the start, when you're doing a new deal, it's easy to just grab the prior deal and just tell your analysts to start updating the numbers—take the paragraph and update it for 2025. But it's from a bond lawyer's perspective or disclosure counsel, it's really important that you take that step-back moment and think about what's really changed in your sector both within your organization, but at a macro level too, to make sure you're thinking about the potential impacts and things that have changed.

Geoff Proulx (41:12):
And just to paraphrase that, it's super important to have a really good lawyer. We are pressed for time, so do we have time for a question or two? So did you have a recent example that folks can—

Jennifer Mendonça (41:38):
So she asked if there is a recent good example. It varies sector to sector, I would say. So it's hard to say "here's the perfect example," and again, because my personal view is that it's nuanced by client. I actually do a lot of work in the higher ed sector, so I'll grab that as an example. If you are doing a deal for an R1 rated research institution, then disclosure around federal funding for research is really important to investors in that sector. But if you're doing a deal for a liberal arts institution that doesn't get a lot of federal funding, then the disclosure around research might look different. So I use that as an example just to say that you can't necessarily just grab Rhode Island Housing's disclosure if I'm doing a deal for them and say that this works for MassHousing because their programs might be different.

(42:36):
If you're looking at a single family deal that's 100% mortgage-backed securities, then disclosure around what's going on with Fannie Mae and Freddie might be more relevant than to an HFA that's just doing whole loans. So it's hard to point at and it keeps morphing. So I don't have a great answer for that other than you just have to really be thoughtful. But we are careful about getting too specific at the macro level about, "this law bill number said this," as that stuff might be more public information and it's more about bringing it home to how it would impact you.

Geoff Proulx (43:17):
And I think we found, Jen, when looking at certain situations that you can piece together coverage from existing disclosure in a lot of cases. Some cases you're left a little bit naked, so you need more, but oftentimes what you have might be sufficient.

Jennifer Mendonça (43:37):
Yeah, I would agree with that.

Geoff Proulx (43:41):
Yeah. So how do you guys really perceive the risks of the privatization? How does that influence your funding operations going forward? I think that there's a lot of speculation around that. I'll just set it up and then turn to the others. But there are some very significant barriers for Fannie and Freddie to come off of the conservatorship, namely the capitalization of both and the purchase back of the warrants from the federal government and how that's financed. There's talk about it being one of the largest IPOs in history. That's all possible, but it's about those levels of details. So I think how it impacts guarantees on mortgage-backed securities and those things, that is going to be something that will be a focus, clearly. And the design of the programs is likely to be about keeping support for the 30-year mortgage loan in the United States. Guys?

Mark Price (44:51):
Everything I know on the subject I learned from a research report that my banker at Morgan Stanley sent me, so you said it all.

Geoff Proulx (44:59):
Another good plug. Thank you.

Thomas McNulty (45:02):
I just think too, you mentioned the guarantee and Geoff did too. I think the MBS market has been very reliant for 40, 50 years on the implicit guarantee of the federal government. So how investors are going to review that guarantee if it's from a private company or with some government backing is going to probably go a long way towards seeing what happens on the market, I would say.

Jennifer Mendonça (45:29):
And I would just say from the disclosure side, this is a perfect example of an area where we have not been adding any heightened express disclosure around the possible exit from conservatorship because it's still so kind of possible, and as Geoff mentioned, there's so many items around it that would have to coalesce before it happens that it just feels too premature to add anything specific because you'd probably just have to change it at some point. So it's a good example of a place where we're keeping an eye on it, but not necessarily adding disclosure yet. It's not ripe.

Geoff Proulx (46:07):
Great. Well, I know our keynote is about to start, so I just want to thank our awesome panel today and appreciate everybody's time and wisdom here.