Multifamily Players Dare to Hope GSEs Won't Be Dismantled

WASHINGTON, DC-There is a growing sense in the multifamily industry that, despite the strong push to privatize housing finance, Fannie Mae and Freddie Mac may not be unwound. It doesn't hurt that both GSEs have posted strong profits in recent years. Also, as politicians get closer to the reality of what it would entail to sell off parts or all of the GSEs, the more practical-minded they become about the mission. The intense lobbying campaign by the industry has likely had some sway as well, says one player. "I think Congress didn't realize how important the GSEs are to housing finance—they liquidity they provide in the capital markets, especially the multifamily side," this person tells GlobeSt.com. "They certainly didn't realize how profitable the multifamily side is."

To be sure, the official party line in Washington is that the GSEs are headed for an exit at some point. Certainly the Federal Housing Finance Agency continues to push the GSEs to conserve, to scale back lending and otherwise shrink. Also the GSEs themselves are positioning their operations for the day when the private markets will be the main source of finance in this space. Earlier this month Fannie Mae priced its inaugural credit risk sharing transaction under its Connecticut Avenue Securities (C-deals) series—transactions is which The GSE transfers some of the retained credit risk to investors in exchange for sharing a portion of the guaranty fee payments.

Then there are the comments Fannie Mae's CEO Timothy J. Mayopoulos, made at the recent Mortgage Bankers Association meeting.

He spoke of building a sustainable housing finance system and on his list of what would comprise such an ecosystem was private capital that stands "in front of the government to withstand market downturns. The amount of this private capital needs to be substantially higher than the capital the GSEs historically held."