MBA: GSEs should deal with multifamily finance differently

Fannie Mae and Freddie Mac may need to alter the commercial finance structure.

Roles of the government-sponsored enterprises in the multifamily market may need to change in the coming years, especially if property management companies are to receive adequate funding for property acquisitions.

Fannie Mae and Freddie Mac currently have financial interests in a significant number of multifamily properties, which includes approximately one-seventh of the homes in the country. According to the Mortgage Bankers Association, there needs to be a new method to help those who own or invest in multifamily properties to make the finance process better.

While Fannie and Freddie are the primary financiers in the market at the moment, the entire commercial multifamily sector needs to diversify, according to a white paper from MBA's Multifamily Task Force. An increased level of capital channels could help improve the overall stability in the market, as well as increase the level of liquidity.

One of the main solutions to these issues is to increase the level of private financing presence in the market, the report explained. This would still involve a role for both GSEs. There is also a need for a stewardship setup for the assets in the GSE, so that there is an overseer for policy actions later on.

"We recognize the critical countercyclical role the GSEs have played in providing liquidity when private capital sources largely scaled back, and we see a need for an FDIC-like risk insurance program in the future state of multifamily housing finance," said Brian Stoffers, chairman of the multifamily task force for MBA. "Policies enacted going forward should reflect that necessary government role but also encourage private capital to enter and remain in the market as the primary source of financing for multifamily housing."

The whitepaper added that the GSEs' future needs to be decided on whether they can be standalone organizations or not depending on the market's long-term stability and the structure's relation to a single-family credit guarantee.

Freddie Mac increases securities offering
While a decision on the future of the GSEs is yet to be decided, each branch is still working with the multifamily market in its regular capacity. Freddie Mac recently announced it plans to offer its 17th multifamily securities offering this year.

The GSE noted it will offer close to $1.1 billion in K-023 Certificates, and these will be priced in early December. Additionally, the offering should settle by late December.

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