GSE Multifamily Lending Grows, Adapts

Michael Tucker mtucker@mba.org

February 13, 2019

SAN DIEGO--Multifamily's role in the housing market is growing--and Fannie Mae and Freddie Mac are playing an increasing role in financing multifamily real estate, GSE executives said here at the MBA CREF/Multifamily Housing Convention & Expo.

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"Our role has definitely changed and we continue to take on a bigger role in financing multifamily real estate," said Freddie Mac President David Brickman. "I find it useful to look at it through three lenses: economic, demographic and our mission. Rental is becoming a bigger thing. Single-family originations are down a little bit, multifamily is likely to continue growing at a faster rate, so that is taking up more focus at the organization. Multifamily is contributing disproportionally to the underlying economics of the business. It occupies a bigger place in our strategic planning."

Fannie Mae Interim CEO Hugh Frater noted while Fannie Mae has a larger proportion of single-family lending than Freddie Mac, "we view multifamily as an essential part of our portfolio. We view them both as super opportunities for us and right down the fairway for our mission. As it relates to our mission and the relative income levels of renters vs. homeowners, we get more from our multifamily business than from single-family."

Brickman said the fundamental economic trend of increasing housing prices will likely lead people to remain in rental housing longer than in past generations. "That probably does push the needle a little toward multifamily," he said. "There is also an urban component to it. The U.S. is getting to the limits of urban areas and thus moving toward more density and more multifamily."

Affordability remains a problem for both single-family and multifamily housing, they agreed. "The reason it's difficult to make starter homes is the basic economics of construction and land use," Brickman said. "It's not favorable to build starter homes."

Frater said the issue Fannie Mae wrestles with is deciding which levers can address the affordability problem. "You can try to lower the cost and increase the sustainability of real estate assets," he said. "Through our green lending program, we're trying to make it more affordable for residents, which makes it a better investment for your customers."

Federal Housing Finance Agency Deputy Director Sandra Thompson said FHFA established the multifamily "Duty to Serve" rule last year. "It focuses on affordable preservation and rural markets," she said. "The affordability issue is real in both the single-family and multifamily business lines. We try to focus our activity on ensuring both entities serve the wide spectrum of owners and renters throughout the country."

FHFA also established a cap on multifamily activity for both GSEs to ensure they do not crowd out other multifamily lenders, Thompson said.

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