February 10, 2010


Fannie Mae and Freddie Mac dominated multifamily financing last year. The two federal government sponsored entities financed 81% of multifamily activity based on Freddie Mac's accounting. Their combined activity totaled $36.4 billion.

Fannie Mae, through its lender and housing partners, provided $19.8 billion in debt financing for the multifamily rental housing market in 2009.

Fannie Mae Multifamily made reinvigorating its mortgage-backed securities business one of its top priorities in 2009. Approximately 81% of total production, or $16 billion, was an MBS execution in 2009, compared to 17%, or $5.9 billion, in 2008.

Approximately 87% of the multifamily units financed by Fannie Mae in 2009 were affordable to families at or below the median income of their communities. Approximately 49% of all multifamily units financed by Fannie Mae served special affordable families (low- and very-low income families in low-income areas), and 48% of the multifamily units financed were made in underserved markets.

Freddie Mac financed its highest percentage of market share, 37% of the overall multifamily market, compared to 29% in 2008. Freddie Mac had $16.6 billion in volume for its multifamily whole loan and bond guarantee business.

Freddie Mac's multifamily transactions financed more than 250,000 apartment units, the vast majority of which are affordable to families earning low or moderate incomes.

Due to a contracting market, the two entities annual production volume declined from 2009. For example, Freddie Mac did $24 billion in 2008. Still its 2009 volume represents the 3rd largest volume in Freddie Mac's multifamily history.

According to Fannie Mae, fundamentals in the multifamily market are expected to remain under pressure in 2010.

That is also the general consensus of the National Multi Housing, in its latest Quarterly Survey of Apartment Market Conditions.

"This quarter saw a continued uptick in sales volume and equity financing, which represent another step, albeit a small one, toward a more normal transactions market, after 2009 recorded the lowest number of transactions of the decade," said Mark Obrinsky, NMHC chief economist. The weakest performing index is the Market Tightness Index, underscoring the fact that full recovery of occupancy and rents will require job growth to return to the economy. When that happens, and as a large wave of Echo Boomers begins to enter a supply-constrained market, we should see above average rent growth."

While the apartment sector benefits from the mortgage programs of Fannie Mae and Freddie Mac, the CMBS market remains dormant and bank lending activity remains subdued, NMHC said.

nancy@callnancyfurst.com