Treasury Department Lifts Cap on Aid to GSEs, Eases Portfolio Limits - NMHC - National Multi Housing Council

Date: January 12, 2010

On December 24, 2009, the Treasury Department issued an important announcement confirming its unlimited support for the Fannie Mae and Freddie Mac through 2012 and easing the portfolio limits on the mortgage giants. Treasury aid was originally capped at $200 billion per institution when the Government Sponsored Enterprises (GSE) were placed in conservatorship. While neither GSE is near the limit (through the third quarter of 2009, $51 billion has been provided to Freddie Mac and $60 billion to Fannie Mae), the Treasury announcement effectively extends the conservatorship through 2012 and makes it clear that the federal government intends to back the GSEs in whatever capacity is necessary to maintain their housing finance activities.

The notice also provides the GSEs with additional flexibility to meet a requirement that they reduce their portfolios by 10 percent a year beginning in 2010. The portfolio reduction requirement for 2010 and after will be applied to the maximum allowable size of the portfolios–or $900 billion per institution–rather than the actual size of the portfolio at the end of 2009. At the end of October, Fannie Mae's portfolio was $771.5 billion; Freddie Mac's was $761.8 billion at the end of the November. This means the companies will not have to take immediate steps to reduce their portfolios and could even expand them.

The Treasury notice should provide added certainty to the multifamily market that the GSEs will continue to be able to provide capital to the sector.