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Why Freddie Mac's New Headcount Is Telling

McLEAN, VA—Freddie Mac hired about 400 people last year with some devoted to the multifamily purchase operations.

By Erika Morphy | erikamorphy | | Updated on February 19, 2016
Freddie Mac headquarters Freddie Mac headquarters
McLEAN, VA—Freddie Mac and its sister GSE, Fannie Mae, don’t play coy with their numbers. Last year the market started to get indicators that the GSEs had had a very good year for multifamily purchases in the fourth quarter. By yearend GSE watchers knew that Freddie Mac had completed a record $47 billion in multifamily purchases, a 67% year over year increase. But sometimes little details get lost in the shuffle, such as employee headcount. In the earnings call for Freddie Mac’s fourth quarter and full-year performance, the question was asked how many people now work there? After the paper shuffling and another reporter stepping in with his data, we got a number: 5,416, the highest its been in ten years and some 400 more than 2014. Much of this new talent has been devoted to IT but there was also a sizeable increase for multifamily, according to CEO Don Layton. A 67% increase in purchasing requires not just capital but labor — people – as well. The figure is telling because elsewhere there are signs that multifamily lending is about to scale back. Whether that means the employees will be scaling back as well remains to be seen. One very key report about this came last month with the Federal Reserve Board’s release of its first Senior Loan Officer Opinion Survey on Bank Lending Practices for 2016. As usual, the survey looked at changes in the standards and terms on, and demand for, bank loans to businesses and households over the past three months, but it also included two sets of special questions: The first set asked banks about their outlook for lending practices and conditions over 2016, and the second set asked banks about their outlook for credit quality in 2016. Multifamily was cited in the commercial real estate category as a tightening loan category. Specifically the survey said that:
A significant net fraction of banks reported tightening standards for MF loans, a moderate net fraction reported tightening standards for construction and land development loans (CLD loans), and a small net fraction reported tightening standards for loans secured by nonfarm nonresidential properties (NFNR loans).

What’s particularly interesting is the low level of default on the multifamily loans at Freddie Mac. As Layton noted during the earnings call, delinquency rates on these loans remain near zero. More than likely, banks are pulling back on lending due to regulatory constraint, not that that is any solace to bank staff that may find themselves out of work. But as Freddie Mac shoulders more of the MF capital markets load, perhaps it may pick up its hiring again.

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