Recently Fannie and Freddie both announced broken records for apartment mortgage lending volume in 2008. The two were highlighted at the Mortgage Bankers Association Commercial Real Estate Finance Convention in San Diego. They bought a combined $60 billion in loans last year grabbing an even more dominant share of the apartment finance market.
- Freddie Mac posted $24.3 billion in non-CMBS multifamily loans in 08 – up 10% from 07
- Fannie Mae financed $35.5 billion in multifamily rental housing including debt financing and bonds
The highlight of the convention was the future of multifamily capital markets and the fate of these two government sponsored enterprises. Currently, nine of ten multifamily mortgage loans are backed by Fannie or Freddie who last September became an assumed government conservatorship. Since the takeover Freddie Mac has funded $6 billion in incredibly complex deals with new products and program innovations. Fannie has conserved capital due to a shrinking 09 marketplace.
Despite help from the big two, commercial and multifamily loan originations decreased 80% in the last quarter of 08 as compared to 07:
- Commercial mortgage-backed security conduit loans – down 98%
- Loans for commercial bank portfolios – down 86%
- Loans for commercial life companies – down 73%
Studies show that $171 billion in Commercial backed securities loans will be maturing in 2009. Delinquency and default rates could increase based on the sheer number that need to resecure.
Both Fannie and Freddie are in a major transition period as conservatorship means accountability to taxpayers – asset performance measures are a must in this environment.
Across the board, in the commercial real estate finance market, multifamily loans appear to be the only thing operating close to normal. All this thanks in part to Fannie and Freddie who continue to look at broadening their investor bases. Bottom line – highly selective lending and strict asset/risk management will continue for some time.