Clarfield: “There could be changes to Fannie and Freddie, but nobody knows what those are going to be." Clarfield: “There could be changes to Fannie and Freddie, but nobody knows what those are going to be.”

LOS ANGELES—With a new administration in office, the industry is bracing for changes to everything from tax codes and interest rates to the government-sponsored enterprises, particularly Fannie Mae and Freddie Mac. Mitch Clarfield, senior managing director at Berkeley Point Capital and an agency expert, is optimistic about the future of Fannie and Freddie. For each of the last three years, his team has done more than $500 million in agency structured products transactions and $1.2 billion in overall deal volume, and he thinks having both agencies are good for the market.

“There could be changes to Fannie and Freddie, but nobody knows what those are going to be,” Clarfield tells “Multifamily is such a small part of Fannie and Freddie that it may get swept in with whatever change is sought for the larger single-family businesses. I am hopeful that they don’t dismantle Fannie Mae and Freddie Mac’s multifamily options because I think they are good for the market. Having both of them is good because they are both very different options. The market is well served by having two approaches that are somewhat different. I really don’t foresee the government taking them apart.”

The proposed changes to the agencies might actually be good for the industry. Clarfield says that there is talk about privatizing the two GSEs. “They are talking about limiting the government guarantee to the bonds that they issue and then allowing them to be privately capitalized for the risk that they are taking on their balance sheet,” he says. “I was hoping that would happen five to seven years ago. I think those are good things.”

Clarfield, however, isn’t as optimistic about other proposed changes, like the elimination of the interest deduction paid on property level debt. “The concept of eliminating the interest deduction and instead taking a deduction for the investment in the property and then allowing that loss to be taken on a going forward basis over time is a sea change to the way that the whole industry operates,” says Clarfield. “In the short-run, that would be extremely disruptive and it could be devastating. It could create a lot of opportunity because I don’t know that people would understand that change. People were taught to look at real estate a certain way, and if this tax proposal goes through, all of that knowledge gets thrown out of the window. I am hopeful that doesn’t happen.”

Overall, he thinks that having strong real estate allies in or close to the White House is going to be a net positive for the commercial real estate industry. “I think that if anyone could look at it critically, Jared Kushner and Steve Mnuchin would be those people,” says Clarfield. “We have two really good allies in Washington, DC, that are really close to the president, as close as you could be. I think that Kushner and Mnuchin are going to be able to prevent something stupid from happening. So, I am really optimistic.”

While Berkeley Point frequently works with Fannie and Freddie, it also works with life companies, banks and debt funds depending on their clients’ needs. “When a deal comes in, we look at all perspectives,” explains Clarfield. “If it is a long-term fixed rate deal, we look at Fannie, Freddie and life companies. If it is a short-term floating rate deal, we look at Fannie, Freddie, some life companies, banks and debt funds. We always make sure we understand the objectives of the borrower. We go to whatever execution provides the best fit for those objectives.”

The firm is optimistic, but it is also working to diversify its loan products to buffer from any changes. “We are working on  diversifying our product base, and have initiatives to do so in the coming months and years. But, the long and the short of it is that there are too many variables to assess exactly what is going to transpire,” says Clarfield, who adds that the firm isn’t looking too far into the future, but instead is focused on the deals in front of it today. “We are spending most of our time focusing on what we can do right now for our customers.”