Monday, May 6, 2013

GSE Pullback via Multi-Housing News Online

What will be the effects on the multifamily sector if Fannie Mae and Freddie Mac reduce their financing levels by 10 percent? Will multifamily property values fall? Will it become more difficult for borrowers to obtain financing? The answer may depend on the type of multifamily property in question.

On March 4, the GSEs’ regulator—the Federal Housing Finance Agency (FHFA)—released its plan to reduce Fannie and Freddie’s “new multifamily business relative to 2012 by at least 10 percent by tightening underwriting, adjusting pricing and limiting product offerings.” Under FHFA’s scorecard, this goal received a substantial weight of 50 percent. FHFA’s directive is, in fact, consistent with one of the three goals announced in 2012 under its Strategic Plan for Enterprise Conservatorships—to “contract Fannie Mae and Freddie Mac’s dominant presence in the marketplace.”

That FHFA has now announced a concrete goal that seems to indicate the government is serious about reducing the financing volumes of Fannie and Freddie. Perhaps the industry has been lulled into a sense of security until now. “Until recently, many market participants believed the multifamily businesses would emerge relatively unscathed from conservatorship,” says Fitch in a statement. “The recent goal contradicts the notion and reaffirms that the multifamily sector could be negatively affected by the far-reaching strategic and structural changes regarding the GSEs.”

Read more...GSE Pullback | Multi-Housing News Online

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