SPECIAL REPORT: Fannie, Freddie Provide Reassurances in Face of Impending 2010 Portfolio Cap
Published: February 12, 2009
By Keat Foong, Executive Editor
San Diego – Fannie Mae and Freddie Mac multifamily executives provided assurances with regards to their companies’ abilities to supply continued liquidity to the multifamily market despite mandated portfolio reductions in 2010, during a session at the Mortgage Bankers Association (MBA) multifamily and commercial real estate conference held here this week.
Moderator Shekar Narasimhan, managing partner of Beekman Advisors, asked if Fannie Mae’s and Freddie Mac’s appetites for multifamily financing will decline when the portfolio cap is imposed and what actions might the agencies take. Currently, the two agencies are said to be responsible for more than 90 percent of the multifamily financing volume, effectively supporting financing for the sector.
Michael May, Freddie Mac senior vice president, multifamily sourcing, said that of Freddie Mac’s $850 billion portfolio, $600 billion is in securities and Freddie Mac has the ability to trade off those securities to make room in its portfolio.
He said that, additionally, a certain amount of Freddie Mac’s single-family loans are prepaid every month, and it needs only, for example, two months of the prepayment to generate a certain amount of additional capital for lending. May also noted that Freddie Mac has the ability to issue markets executions.
In the future, Freddie Mac can place the loans through a variety of ways including portfolio, securitization or capital markets executions and that he “[does] not see a problem.”
Fannie Mae’s senior vice president, multifamily, Phillip Weber said the agency’s top priority is to broaden the base of investors for its DUS MBS securitization program. This way, more of its loans can be securitized rather than kept in portfolio, and thus not be subject to the portfolio limits.
Weber said the Federal Reserve or Treasury could purchase its debt or mortgage backed securities, but “we won’t wait for them to make that decision.” Weber said that a lot of securities have already been traded to third-party investors. He said Fannie Mae has seen encouraging signs of investor interest as the markets continue to normalize.
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