There’s broad consensus that the next iteration of the housing finance system must protect taxpayers, emphasize the private markets, support a broad variety of housing options and remain liquid throughout ebbs and flows of an economic cycle.
But what’s been surprising as NMHC has struggled through the previous fits and starts of housing finance reform is how few people recognize that a proven model already exists that meets those objectives: Fannie and Freddie’s multifamily programs.
Largely overshadowed by the significant losses coming from their single-family portfolios, Fannie and Freddie’s multifamily programs performed remarkably well during and after the housing crash. Loan performance remained strong, with delinquency and default rates at less than 1 percent-a mere fraction of the defaults that plagued single-family at the bottom of the cycle.
Moreover, as Fannie and Freddie’s single-family businesses have struggled to get out of the red, their multifamily businesses have continued to be profitable on balance, with the GSEs’ combined multifamily comprehensive income reaching $30 billion from 2008 through the second quarter of 2015.
These positive performance metrics are because of the GSE multifamily programs’ adherence to prudent underwriting standards, sound credit policy, effective third-party assessment procedures, conservative loan portfolio management and, most importantly, risk-sharing and retention strategies that place private capital ahead of taxpayers.