The GSEs and student housing (l-r): Joe Stepchuk, Steve Whitehead, Kelli Carhart

IRVING, TX-During the worst of the economic downturn, Fannie Mae and Freddie Mac held up much of the multifamily sector. This spilled over into student housing, as the agencies funded acquisitions and a limited amount of construction.

These days, with more lending competition is coming into the field (leading to more debt becoming available), Freddie Mac’s Kelli Carhart and Fannie Mae’s Joseph Stepchuck shared some of their observations at the RealShare Student Housing conference, which took place on May 14. The RealShare Conference Series is part of ALM’s Real Estate Media Group, which also publishes and Real Estate Forum.

More specifically, Carhart, who serves as Freddie’s director of multifamily production and sales and Stepchuck, who is Fannie’s director, commented on issues ranging from the current state of the GSEs (quite good) to what the agencies are looking for when it comes to lending. The panel, which was moderated by Stephen Whitehead, senior vice president – senior director NorthMarq Capital, also addressed the 10% government-mandated cutback.

“It won’t impact the appetite for borrowing,” Stepchuk noted. “There is more competition than last year from other lenders.” Added Carhart: “The life and conduits are becoming more aggressive.”

But Fannie and Freddie are cognizant of the fact that foreign investment is a fact of life in any kind of commercial real estate, and student housing is no exception. Fannie Mae wants to see at least one layer of US management that is involved with property. Following that, the agency examines track records. Freddie has similar requirements when it comes to foreign investment. “We like to see 10% liquidity in a US bank account as well,” Carhart said, pointing out Freddie’s requirements.

Having said that, however, both Carhart and Stepchuk said their respective agencies have general guidelines when it comes to issuing loans, though little, if anything, is carved in stone. For Freddie Mac, student housing affiliated with and/or serving larger universities is preferable and the agency is trying to dial back on financing new construction. Freddie Mac also likes to see solid student housing operators who know what they’re doing. “Less than two years of operation, and we’ll rachet back coverage to 75%,” Carhart said.

Meanwhile, Fannie Mae likes that 75% loan-to-value and sponsors that have at least four years of student housing management experience. As such, if newcomers want to come into the field, “they may want to consider hiring experienced third-party managers,” Stepchuk advised.

Even if someone doesn’t have that experience, however, creative solutions can be found. Furthermore, both Stepchuk and Carhart caution that there is no such thing as blanket guidelines. “We look at each transaction, case by case,” Stepchuk added.