It is worrisome news for companies that rely on the GSEs – both Fannie Mae and Freddie Mac – to support multifamily sales. Right now the two agencies are just about the only source of capital for multifamily finance, Tim Sabet, a research analyst with Coldwell Banker Commercial Ideal Realty Group, tells GlobeSt.com.
"Fannie helps us tremendously -- they will support value add properties which is what we primarily do." Freddie Mac, by contrast, tends to support new or trophy-class assets. The two together, he concludes, "are filling a huge void in the market. We just hope they don't go under."
However, Mortgage Bankers Association bolstered confidence that Fannie and Freddie will remain viable sources of multifamily finance. There were also positive signs to glean from Fannie's earnings, as well as welcome news from its regulatory agency.
In the conference call Mudd said that the GSE is positioning itself for further growth, despite the housing sector's deep entrenchment right now. It will be raising $6 billion in new capital through underwritten public offerings as well as saving cash by slashing dividends by 29%. Then, the Office of Federal Housing Enterprise Oversight announced that it is lowering its capital reserve requirements to 15% from 20% for Fannie and has lifted its 2006 Consent Order. "This action reflects two years of hard work by Fannie Mae in remediating their problems," Ofheo Director James Lockhart, says in a prepared statement.
Separately, new MBA figures show that the commercial/multifamily originations market grew 19% in 2007, with mortgage bankers closing $507.7 billion in commercial/multifamily loans. "Even with the credit crunch hitting mid-year, 2007 still set a record for commercial/multifamily mortgage originations," Jamie Woodwell, MBA's Senior Director of Commercial/Multifamily Research, says in a prepared statement. "The 2007 numbers show both the importance of the commercial mortgage-backed securities (CMBS) market to commercial real estate finance and the depth of other funding sources, such as banks and thrifts, life companies, Fannie Mae, Freddie Mac and others."
Among major investor groups, Freddie Mac saw the greatest percentage increase in volume between 2006 and 2007, followed by Fannie Mae; CMBS, CDO and other ABS conduits; real estate investment trusts; and life insurance companies.
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Erika Morphy
Erika Morphy has been writing about commercial real estate at GlobeSt.com for more than ten years, covering the capital markets, the Mid-Atlantic region and national topics. She's a nerd so favorite examples of the former include accounting standards, Basel III and what Congress is brewing.
