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Commercial Department: From the Editor: June 2016


From the Editor

Uncertainty is a sure thing for Fannie Mae and Freddie Mac

From the EditorEight years ago, when Fannie Mae and Freddie Mac became wards of the federal government, the takeover was an emergency response to a nightmarish financial crisis. Today, their conservatorship under the Federal Housing Finance Agency (FHFA) is an accepted — although still intended as a temporary — fix for the mortgage-lending market.

Bad mortgages and falling home prices crippled the two government-sponsored enterprises (GSEs) in 2008 and threatened the survival of the entire U.S. mortgage business. A $180 billion bailout rescued the institutions and saved mortgage lending as we know it, including the commercial side of the business, which depends on Fannie and Freddie to back about one-third of all U.S. multifamily mortgage loans.

There’s been talk over the past eight years of moving past the emergency restructuring and proceeding with GSE reform. Mortgage-finance groups have lobbied Congress on the issue, and earlier this year a group of housing-finance experts generated some attention when they suggested merging the institutions into a single entity that would buy mortgages from lenders and securitize them by issuing bonds backed explicitly by the U.S. government.

But what’s most striking about the debate over the future of Fannie and Freddie is the shortage of actual debate. GSE reform, and mortgage finance in general, are nonissues in the presidential campaign, and the universal forecast is that no restructuring will even be proposed in Washington until a new president and Congress are in place, if then.

The lack of attention belies the GSEs importance to commercial mortgage brokers and their clients. The $89 billion in multifamily loans backed by Fannie and Freddie in 2015 included substantial support for senior housing, student apartments, cooperative residences and manufactured-housing parks, as well as for refinancing and rehabilitating apartment projects.

The GSEs, and the commercial lenders they do business with, also carry out policy initiatives set by Congress and the FHFA. Those policies favor loans that fund affordable housing, promote historic preservation and offer interest-rate breaks and other incentives to multifamily borrowers who invest in energy-efficiency projects.

Those targeted loans are the topic of this month’s Q&A on Page 20 with Bob Simpson, Fannie Mae’s vice president for affordable, small-loan and green multifamily financing. Simpson talks about the rationale behind, and the demand for, those loans — many of which are exempt from the congressional cap on overall GSE multifamily lending.

Unlike GSE reform, volatility in the commercial mortgage-backed securities (CMBS) market has been getting a great deal of attention lately among borrowers, lenders and analysts. We offer two articles to help shed light the CMBS turbulence: On Page 44, Ann Hambly, the CMBS authority at 1st Service Solutions, analyzes the uncertainty that is roiling the market; and on Page 28, our DataDecoded column considers whether there is a fundamental shift occurring in the CMBS-loan market.

We offer a mix of other topics this month that we hope will be of interest, including a look at the burgeoning tourism industry in Cambodia (Page 18) and an examination of hipster culture and its impact on the landscapes and fortunes of U.S. cities (Page 38). As always, the bulk of what is in the magazine is written by the experts in the commercial mortgage business — our readers. If the muse strikes, and you have something to share with your colleagues in the industry, I invite you to consider submitting an article yourself.


Bill Lewis was editor of Scotsman Guide Commercial Edition. For questions about this article, call (800) 297-6061 or e-mail

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