Agencies' Dominance of Capital Markets Examined

[IMGCAP(1)]WASHINGTON, DC-Most investors and developers in the commercial real estate industry today are bemoaning the state of the capital markets, what with the retreat of the CMBS market and the reluctance of large banks and institutions to funnel additional money into asset class. However, for multifamily players at least, there remains a somewhat reliable avenue to obtain capital–government-sponsored entities such as Fannie Mae and Freddie Mac. In fact, many of those active in the sector freely admit these groups are the first places they go to when seeking funds for acquisitions or new projects.

According to the locally-based Mortgage Bankers Association’s most recent figures, the GSEs and Ginnie Mae hold the largest share of multifamily mortgages outstanding, as of the fourth quarter–34% of the pool, with $136 billion in federally related mortgage pools and $148 billion in their own portfolios. GSEs also saw the largest increase in their holdings of apartment mortgage debt, of $21 billion, or 17%.

“While some sectors such as CMBS slowed down in the second half of 2007 compared to the second half of 2006,” says Jamie Woodwell, senior director of research for commercial/multifamily for locally based MBA. “Fannie and Freddie were running 50% ahead of what they had in 2006–there was certainly strong origination volume there in the second half of the year. Additionally, counter to what we’ve been hearing, the fourth quarter actually saw record increases in the amount of multifamily mortgage debt outstanding, and about 88% of that came from the GSEs–be it through their portfolios or mortgage-backed securities.”