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The promising Senate bill needs to do more to ensure an affordable market for multifamily mortgages, aid historically underserved borrowers and protect struggling homeowners.
August 6 -
Fierce competition, a run-up in prices, and an expected jump in interest rates in the years ahead could spell bad news for banks that hold multifamily loans on their balance sheets. Cheap financing from Fannie and Freddie is also fueling concerns of a bubble.
February 8
The Federal Housing Finance Agency is seeking public input by Oct. 8 on strategies for reducing Fannie Mae and Freddie Mac's presence in the multifamily housing finance market in 2014. How about firing luxury developers on the Donald Trump end of the pricing spectrum?
One proposed strategy is crucial: limit or even stop Fannie Mae and Freddie Mac from refinancing the largest mortgages, like Fannie Mae's December 2012
Luxury apartments and mortgages over $25 million certainly fulfill some market demand, but there is no shortage of credit there. Fannie Mae and Freddie Mac should see that the need for additional financing for small rental properties is hiding in plain sight.
There is a major blind spot in America's mortgage finance system that is preventing more and more families from finding "naturally affordable" rental homes the lack of a functioning secondary market for small properties. Defined as having five to 49 units or mortgages under $3 million, small rental properties contain
Housing experts have documented that
The supply of naturally affordable rental properties across the country can only be expanded and improved with access to readilyavailable, reasonably priced, stable sources of mortgage finance. We have already lost ground because of the credit crunch in this underserved sector. As the Chicago Tribune
Banks and mission-based lenders
By 2011, the average multifamily mortgage financed through Fannie Mae, Freddie Mac and even the Federal Housing Administration, ranged from
In 1998, Congress actually repealed any per-unit loan limits on Fannie Mae and Freddie Mac's multifamily mortgages. Bipartisan legislation enacted in 2008 encouraged Fannie Mae and Freddie Mac to make a secondary market in mortgages on small rental properties. Instead, Fannie Mae and Freddie Mac have increasingly targeted the most lucrative, largest loans, even on luxury properties.
- Fannie Mae said that in 2011 it was the "largest purchaser of permanent debt in the multifamily sector," with
$24.4 billion in debt financing, and that it nearly doubled the amount of the largest loans ($25 million and above), to about 28% of its multifamily total. It also reported that10% of its financing was for loans under $5 million , including some small properties, and incredibly, that49% of its multifamily small loan book of business is highly concentrated in just two MSAs, Los Angeles and New York.
- Freddie Mac reported
$20.3 billion in multifamily loan purchases and bond guarantees in 2011. Incredibly, only691 units were in small properties, according to FHFA. The company also announced in 2011 that it transacted$1.5 billion in targeted affordable housing products, including $1 billion in multifamily bond enhancements, leaving just $500 million, or 2% of its multifamily activity, in mortgages on targeted affordable properties.
The GAO
Judy Kennedy is the president and CEO of the National Association of Affordable Housing Lenders.