refocus on freeingup consumer and small business credit. Specifically, he said, theTroubled Asset Relief Program would not be used to buy up toxicmortgage-backed debt from companies that had invested in thesesecurities.

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That particular development was a blow to the commercial real estateindustry, which had been counting on the federal government tomove these securities off of investment banks' balance sheets sothey would begin lending again. The new focus on consumer lending,it seemed, would come at the expense of the commercial real estateindustry.

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That was then, though. Yesterday, Paulson revealed new plans forthe remaining funds that had been made available to Treasury tobolster the economy. And true to his words earlier this month, itis focused on consumer lending, with the launch of a $200-billionfacility to support student, auto, and credit card loans and loansbacked by the federal Small Business Administration. However oneCRE subsector--multifamily--also received a new financial boostfrom Treasury and the Federal Reserve Bank. The Federal ReserveBank plans to buy, up to, $100 billion of debt issued by FannieMae, Freddie Mac and the Federal Home Loan Banks. It will also buy,up to,$500 billion of mortgage securities backed by Fannie Mae,Freddie Mac, and Ginnie Mae.

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The consumer ABS facility is not going to have a direct impacton multifamily, David Cardwell, vice president of capital marketsand technology of the National Multifamily Housing Council, toldGlobeSt.com. "But it will benefit [the multifamily market]indirectly because consumers will have greater access to credit."Also, he concludes, the $500 billion of mortgage securitiespurchases will primarily benefit the single family home market.

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Multifamily, though, will receive a significant boost from thegovernment's $100-billion plan to buy the GSE's direct obligations,he said. "There is a direct correlation between the obligationsthat are purchased [and] the capital costs that are part of themortgage rates provided to both the multifamily and single familyborrower," Cardwell says.

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These obligations, he explains, are the equivalent of corporatepaper. "What has happened is that the market--to purchase thoseobligations--has dried up since Fannie and Freddie went intoconservatorship." Since then, rates and overall activity have notbeen where the government would have liked, he adds. Because theFed will begin purchasing these obligations through auction verysoon, the impact will be felt in lower rates within a few weeks. "Icannot say by how much the rates will be reduced--but there isbound to be an impact," he said.

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The purchase of $100 billion in direct obligations of Fannie Maeand Freddie Mac--as well as MBS backed by Fannie and Freddie--willresult in a short-term reduction in spreads on these obligations,Neil R. Shapiro, a Herrick, Feinstein transactional real estateattorney, agreed.

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Shapiro, who has a sub-specialty in multifamily development andfinance, tells GlobeSt.com, "Due to the current lack of liquidityfor typical purchasers of these obligations, it is a buyers' marketnow and--without governmental and Fed intervention--spreads willonly get wider in the short term. This $100 billion will providethe government-sponsored enterprises with additional liquidity,which they will then use to provide much-needed credit in thehousing markets."

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Shapiro adds that although the impact of these funds will have apositive impact, he is skeptical whether private investors willfollow the Fed back into the market. "Private investors are likelyto view this Fed action as an aspirin intended to alleviate thesituation in the short term, rather than as a long-term solutionworthy of investors following with their own capital."

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For more on the Federal Bailout, read Real Estate Forum'sCan$700 Billion Unclog the Credit Spigot?"

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