At the National Multi Housing Council's Apartment Strategies Update, a handful of apartment industry experts got together recently to go over the current state of the market, the factors weighing heavily against it and where they believe the sector is headed.First and foremost is the issue of the government-sponsored entities. After a glut of financial woes, federal officials took over conservatorship of Fannie Mae and Freddie Mac.

Doug Bibby, president of NMHC, characterized the GSE bailout as "a hybrid between the Continental Bank and Chrysler-type approach;" that is, somewhere between nationalization and giving the firms an equity infusion. "Secretary Paulson I believe was more concerned with the worldwide stability issues, particularly Asian holdings of MBS and agency debt," he related. "There's also a lot of political undercurrent in just putting an equity infusion into the companies as they're structured. The conservatorship approach is kind of like being in Chapter 11 versus being in Chapter 7."

In an effort to help stabilize the markets and keep it liquid, the GSEs may grow their MBS business without limits over the next 15 months. Their retained portfolios of whole loans and MBS, which currently are at less that $800 billion, may grow to $850 billion each. As Bibby told it, the plan will allow Fannie and Freddie to buy about $20 billion per month in agency MBS, barring subprime mortgages and Alt-A, and with an up to $100-million pledge to each firm from the Treasury, they should remain net-worth positive. In exchange, the government will own just less than 80% of each company; the Federal housing Finance Agency will essentially be the preferred shareholders, and those common and first-tier preferred holders are, in effect, holding penny stocks right now.