Ryan Haase

This fall, several events related to Fannie Mae and Freddie Mac occurred that cumulatively made them less competitive in multifamily lending and created uncertainty around the GSEs moving forward. Since then, banks, life companies, and conduit lenders are fighting tooth-and-nail to recapture multifamily financing market share in light of the resultant agency void.

Fannie Mae and Freddie Mac announced in late August that they had reached their target loan production allocations for 2019. As a result, agency loan production came to a screeching halt, with the few ongoing transactions being executed at far more conservative levels and on a much more selective basis. Quoted spreads widened approximately 70 basis points, leverage levels decreased, and waivers were halted, effectively stalling production and making quotes much less attractive to commercial real estate borrowers.

In the following weeks, issuance of the US Treasury Department's long-awaited plan to end government conservatorship of the GSEs, as well as the Federal Housing Finance Agency's announcement of new lending guidelines for the GSEs, further clouded the current and ongoing multifamily lending operations of the GSEs.

A Historical View of Multifamily Lending

Over the past several years, the multifamily lending sector has been dominated by the agencies. Historically, the agencies have been able to outperform life companies, banks, and conduit lenders due to their low cost of capital and governmental guaranties. While they were created for the purpose of making housing affordable, they have slowly crept into the non-affordable housing space, winning away Class A multifamily housing business that typically had gone to their competitors. As a result, the percentage of multifamily loans on the balance sheets of life companies and banks has decreased over the years.