The Shifting Landscape of Agency Lending: Q&A

PGIM's Stephanie Wiggins on what's driving growth for Fannie Mae, Freddie Mac and FHA lenders.
Stephanie Wiggins, Managing Director & Head of Production, Agency Lending, PGIM Real Estate. Image courtesy of PGIM Real Estate

As the new managing director & head of production for PGIM Real Estate’s agency lending platform, Stephanie Wiggins has joined the firm at a time of unprecedented growth for PGIM’s agency lending production.

The pandemic has bolstered the company’s origination volumes, which led to the newly created role Wiggins filled this January. In the interview below, she shares how 2020 reshaped the agency lending sector and what 2021 has in store for multifamily fundamentals.


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Please tell us about PGIM Real Estate’s agency lending platform and the programs that saw heightened demand since the onset of the health crisis.

Wiggins: As it was for most Fannie Mae, Freddie Mac and FHA lenders, 2020 was a year of unprecedented volume for our agency lending platform. Beyond traditional agency lending, our firm’s programs that have gained heightened market attention since the start of the pandemic include bridge lending through PGIM’s Enhanced Agency Gateway Program, which offers attractive pricing for pre-stabilized and value-add properties that are not ready for permanent financing; equity investment through institutionally validated multifamily funds; core lending for all real estate sectors through our general account; and deep value-add lending through debt funds.

What are the main elements PGIM takes into consideration when evaluating a potential transaction?

Wiggins: Factors that we evaluate include sustainable collections, the borrower’s experience and financial capacity, the performance of the SREO, remaining cash equity, the property’s ability to refinance, eviction moratoriums, and the location and conditions of each property.

In the current economic climate, what are some of the main issues for underwriting in agency lending?

Wiggins: Issues that we have been focused on include underwriting to a collections figure that is sustainable, a property’s ability to evict non-paying or problem tenants, and navigating third-party property inspections to ensure the quality of the property and neighborhood are properly assessed.

There have been no significant changes to PGIM Real Estate’s underwriting standards, but we have adopted the agencies’ COVID-19 underwriting requirements.


READ ALSO: What to Expect From Multifamily Underwriting This Year


How did the GSEs’ debt service reserve requirement, implemented after the onset of the pandemic, impact the lending process? 

Wiggins: At the beginning of the pandemic, the reserves were aggressive. Eventually, both agencies settled on just a debt service ratio. When the agencies moved to DSR-only, it appeared to be accepted in the market, and there was little impact on the lending process.

As the year went on, we were able to see the impact of COVID-19 on properties, with both agencies reporting that none of the properties financed over the previous 12 months tapped into the DSR. This shows that it is time to revisit the requirements.

What changes do you expect to be temporary and what will most likely be permanent in terms of agency lending?

Wiggins: Most of the agency changes will be temporary, with the exception of delinquencies/aged receivables. I think the agencies are going to want lenders to continue to request, monitor and underwrite these.

Looking ahead, what are some of the determining factors that will likely shape the multifamily lending market?

Wiggins: The economy will shape the lending market, as the current administration’s stimulus provides relief and positive momentum. Vaccination efforts support optimism; GDP and employment growth make up for pandemic losses; and the Fed remains accommodative and unlikely to raise rates in 2021.

Multifamily fundamentals will remain strong despite the extraordinary circumstances of the past year. A full recovery is not yet complete, but the market is well-positioned for a strong 2021 and beyond. The pandemic’s effect on lower-income households will continue to highlight the critical need to bolster the supply of affordable housing in the U.S. Additionally, the shift away from high-cost large cities will continue and the Sun Belt cities will benefit as a result.