Investors Vie for Fannie Mae Paper Even As Competition Mounts

WASHINGTON, DC—Fannie Mae priced its third multifamily DUS REMIC for 2015, a $1.06 billion offering. Its other two offerings for the year included a DUS REMIC totaling $1.15 billion in February, and one in January totaling $1.22 billion.

Investors' appetite for this paper, while overall steady, can be a nuanced story. In January, for example, Josh Seiff, Fannie Mae's Vice President of Capital Markets and Trading, reported that there was a tremendous amount of new issue paper, giving investors have a lot of choices. "It is hard to get their focus," he said, adding that Fannie Mae's inaugural offering for the year still "clearly did."

Fast forward to this latest deal: the overall story line is the same even if the details slightly vary. Right now, investors are pursuing short-duration high-quality paper, says Seiff.

So far, there is little sign that such paper will become less available, even if Washington DC every now and then floats talk of a GSE scale back or privatization. In a separate report issued recently, JLL noted that the GSEs led the multifamily financing sector in 2014, notching nearly $55 billion in lending volumes. This trend will continue but JLL also highlighted the fierce competition for these deals. Life companies, conduits and banks are eager for them as well, and they are gaining ground. In fact, in 2014, GSEs posted a slightly smaller market share in 2014, according to Faron Thompson, leader of JLL's multifamily debt financing platform.

"Other lenders are becoming competitive but the agencies will maintain their edge with the introduction of new products including a small balance loan initiative, manufactured housing program, tax-exempt loans and value-add products."

Meanwhile, Fannie Mae's REMICs and Freddie Mac's K-Certificates will continue to attract investors for some very good reasons, Seiff says. "Unlike a conduit, Fannie Mae shares risk with its DUS lenders through the life of the loans," he said in a prepared statement when the second offering was introduced. "Investors clearly appreciate risk retention and experience." For that deal, he noted, Fannie Mae "had more than three dozen investors in the deal, even though the market was crowded with other new issuance."