GSEs Almost Back in Taxpayers' Good Graces

WASHINGTON, DC-Stellar quarterly earnings reports by Fannie Mae and Freddie Mac underline that the GSEs are nearing a key benchmark: full repayment of the close to $188 billion the federal government was forced to inject in them during the housing crisis. Freddie Mac reported a third-quarter profit of $30.5 billion and plans to return $30.4 billion to the Treasury. Fannie Mae posted a $8.7 billion profit for the quarter and is sending $8.6 billion of that to Treasury.

The GSEs are understandably proud of their performance. Said Fannie Mae's president and CEO, Tim Mayopoulos during the earnings call: "As you can see from the numbers, we've had another terrific quarter. I'm very pleased with our performance. And our results are really evidence of the quality of our business and proof that the measures we've taken over the past few years have righted the ship."

The GSEs' performance this quarter will undoubtedly lend credence to the theory (or rather hope in some quarters) that the GSEs will not be unwound as the Obama Administration and many in Congress have said will happen.

But even if the GSEs stay intact, it is clear that their role and relationship with private capital is changing. The multifamily sector appears to be weaning itself off, at least slightly, from the GSEs' platform. Exhibit A is the new CMBS platform that Walker & Dunlop has debuted.

One reason for the launch is that the agencies have started to pull back from their multifamily finance operations and W&D saw the need to step in, W&D's Tim Koltermann told GlobeSt.com this week.

The GSEs, as well, are changing their approach to this new reality by putting in place underwriting reforms and, in the case of multifamily, scaling back their lending.

They are also developing products that put off more risk on the private sector.

Last month Fannie Mae priced its first C-deal offering, a $675 million transaction in which the GSE farmed out some of the risk in its portfolio to private investors. According to Fannie Mae vice president Laurel Davis, the GSE expects to issue these regularly in 2014.