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GSE multifamily-financing activity remains elevated

The government-sponsored enterprises (GSEs) bankrolled a lesser volume of multifamily loans in the first half of this year, but the numbers remain elevated compared to recent history.

The GSEs financed a total of $54.4 billion in multifamily mortgages in the January-June period, the agencies recently reported. This was down 5 percent from the volume in the first half of 2017.

freddmultifamilyThe lesser volume was due to a drop in Fannie Mae’s activity. Fannie provided $25.8 billion in liquidity to the multifamily sector in the first half of 2018, down nearly 16 percent from the $30.7 billion for the same period in 2017.

Freddie, by contrast, was ahead of last year's pace. In the first six months, Freddie financed $28.2 billion in multifamily loans, up 6.7 percent from the $26.8 billion it bankrolled in the first six months of last year. Last year, Freddie's multifamily funding level was $73.2 billion. 

The GSEs reported that their activities in the first six months provided liquidity to 342,000 rental units each. In the second quarter, 90 percent of the loans funded by Fannie and 87 percent by Freddie were tied to rental units that were affordable to families earning at or below the median wage, the GSEs reported.

Last year, the GSEs financed a total of $140.2 billion in the multifamily space, a large share of which was driven by financing tied to “green” apartment buildings. The overall GSE funding last year was 325 percent higher than in 2010, when their combined financing in multifamily was just $33 billion.

Just as with the single-family market, the GSEs don’t lend directly in the multifamily space, but purchase and guarantee loans from lenders. Lenders often retain some of the risk of the loans.

Unlike the single-family home business, the GSEs are subject to a federal cap on their financing activity in multifamily, but also have been given considerable flexibility to work outside this cap when the loans are being used to finance affordable housing. They also can finance an unlimited amount of volume in certain targeted areas where owners and developers may need incentives, such as energy-efficiency upgrades to apartment buildings.

GSE-origination volume has steadily grown during the tenure of Federal Housing Finance Director (FHFA) Mel Watt. For this year, though, FHFA slightly lowered the GSEs' multifamily-lending caps to $35 billion each.

The GSEs have traditionally taken a large role in multifamily financing, according to a 2015 Urban Institute study. Before the Great Recession, the GSEs were bankrolling about a third off all multifamily loans. That share of the overall market rose dramatically in the first couple of years after the financial crisis, but the overall GSE footprint drifted downward as private funding for apartments became more readily available.


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