On Oct. 9, 2012, the General Accountability Office (GAO) issued a report on the multifamily mortgage financing activities of Fannie Mae and Freddie Mac. The 98-page report provides data and information about the multifamily mortgage purchase activities of the two government-sponsored enterprises (GSEs), compares and contrasts their activities to private mortgage capital serving the apartment sector and highlights their strong credit performance and financing of workforce and affordable housing.
The report confirms NMHC/NAA’s main advocacy message: Fannie and Freddie provide a critical source of liquidity for the industry, serving a wide range of apartment markets, borrowers and properties.
The report also emphasizes their capacity to backstop the multifamily finance system, providing critical debt capital when private capital markets pullback on lending and also filling the gaps when the markets are fully active. The report notes that during normal market conditions, institutional lenders such as banks, life insurance companies and the private-label securities market dominate the apartment finance market, accounting for more than 70 percent of all mortgage debt originated each year. However, when the financial markets retreat, Fannie and Freddie have the capacity to accommodate borrower needs.
In addition, the report underscores a major point of differentiation between the GSEs’ multifamily and single-family financing activities and performance. Unlike their single-family business activities, Fannie and Freddie’s multifamily mortgage activities have demonstrated a long-held and consistent approach to strong credit underwriting, provided liquidity to the market and provided solid returns to the government when the losses in the residential home mortgage sector created reliance on government financial support.
Congressman Spencer Bachus (R-Ala.), Chairman of the Committee on Financial Services in the House of Representatives, requested the GAO’s independent assessment of the GSE multifamily programs. The GAO submitted the report after a 10-month assessment and analysis beginning in November2011 and concluding in September 2012. NMHC/NAA have been a vocal advocate on GSE reform and supported both the Committee and Chairman in calling for the GAO study. NMHC/NAA believe that this information is important to the debate around GSE reform, helping Congress and other policymakers understand the integral role the GSEs play in the multifamily financing system and the successful history of their multifamily mortgage programs.
More information on the report can be obtained at the GAO website at http://www.gao.gov/products/GAO-12-849.