Jared Kushner relinquished control of his family's multibillion-dollar real estate business in January to eliminate conflicts of interest when he became a top White House adviser to his father-in-law, President Donald Trump.
Yet Kushner Cos. has apartment buildings from New Jersey to Maryland with more than $500 million in government-backed mortgages financed by Fannie Mae and Freddie Mac. That could put officials at those agencies in an awkward spot: If Kushner Cos. applies for a new loan, or wants to refinance, would Freddie turn them down? If Kushner Cos. fails to comply with the terms of a loan, will Fannie seek to foreclose on a property owned by the president's in-laws?
"It clearly represents a conflict-of-interest because the government or the president can take actions that would benefit his family," said David Reiss, a professor at Brooklyn Law School who has written about issues related to Fannie and Freddie.
Hope Hicks, a White House spokeswoman, said Kushner would comply with applicable ethics rules and would recuse himself from any discussions about overhauling Fannie and Freddie, which lawmakers have sought to do in recent years. Jamie Gorelick, an attorney who has represented Jared Kushner, didn't respond to a request for comment.
Kushner Cos. says Jared's White House position won't have any effect on the family business. "The election has not changed Kushner Companies' relationship with Fannie Mae and Freddie Mac," said Kushner Cos. spokesman James Yolles. "And we will respond to policy changes like any other private company in the marketplace."
The federal government took over Fannie and Freddie in 2008, amid the financial crisis, putting them under the control of the Federal Housing Finance Agency, an independent regulator.
The FHFA is run by Mel Watt, appointed by former President Barack Obama. Watt's term ends in 2019, at which point Trump will pick a successor, though it's possible the president could try to remove Watt from office before then. FHFA spokesman Peter Garuccio declined to comment on potential conflicts, as did spokesmen for Fannie and Freddie.
Kushner's possible conflicts have drawn less attention than those of Trump. A team of ethics and legal specialists filed a lawsuit last month accusing the president of violating the Constitution by allowing his hotels and other businesses to take money from foreign governments. Trump has said he transferred control of his business to a trust managed by his eldest sons and a longtime associate to avoid any conflicts.
The Trump Organization mostly own hotels and office buildings that don't qualify for Fannie and Freddie loans. Trump last year reported holding a 4% stake in Starrett City, an affordable housing development in Brooklyn that has $399 million in outstanding loans financed by Freddie, according to data compiled by Bloomberg. The company didn't respond to an emailed request for comment.
New York-based Kushner Cos., built by Kushner's father, Charles, owns buildings with more than 20,000 apartments, and 13 million square feet of commercial space. Kushner, 36, took over the company after his father was convicted in 2005 of crimes including witness tampering and tax evasion. Charles Kushner served more than a year in prison.
During Kushner's tenure leading the company, he oversaw the acquisition of 11 properties and three refinancings funded by $581 million from Fannie and Freddie, according to real estate data firm Real Capital Analytics. Real Capital includes in its loan tallies any buildings for which records show Kushner Cos. has an ownership stake.
About $568.8 million is outstanding on those Fannie and Freddie loans, according to data compiled by Bloomberg.
Among the outstanding mortgages: Kushner Cos. in 2015 refinanced a 124-unit complex called Skyline Terrace in Hasbrouck Heights, N.J., with a $15 million Freddie-backed loan. The complex, made up of squat two-story brick buildings within commuting distance of Manhattan, this month advertised a 500-square-foot, one-bedroom apartment for $1,173 a month.
When Kushner stepped down from the company in January, he turned over control to his father and President Laurent Morali.
Kushner, who in 2009 married Trump's eldest daughter, Ivanka, served as a key confidant during the president's campaign while continuing to run the business.
The couple moved to Washington after the election and he has resigned as chief executive of Kushner Cos. Kushner isn't collecting a salary in his position as senior adviser to Trump.
Gorelick said in January that Kushner would sell his interest in 35 investments, with some going to his mother and brother. Kushner would recuse himself from decisions that could affect properties he continues to own, Gorelick said.
Yolles declined to comment on whether Kushner still owns stakes in buildings with Fannie or Freddie financing.
Fannie and Freddie don't issue mortgages directly to borrowers. Instead, they buy them from lenders.
Before loans are issued for large or unusual deals, representatives of Fannie set interest rates and review borrowers' applications that are submitted to the lenders. They don't do that for smaller, routine loans.
Freddie, however, examines all applications submitted to the lender, including scrutinizing the appraisal and applicant's history of payments on other loans. Depending on the review, Freddie representatives could adjust the interest rate quoted by the lender.
If Kushner Cos. fails to make Fannie-backed loan payments on time or violate other terms, Fannie employees would determine whether to foreclose. Fannie backs about $142.3 million of the outstanding loans.
In the case of Freddie, which backs about $426.5 million of the outstanding loans, a servicer would decide whether to foreclose.
Kushner Cos. has run into trouble with loans before. The company in 2011 was on the verge of defaulting on more than $1 billion of loans on 666 Fifth Ave., a Manhattan office tower, when Vornado Realty Trust injected $80 million to stave off creditors.
Fannie and Freddie, which back about a third of all apartment lending, often have the best terms for large deals and those targeting low-income residents, housing specialists say.
The companies are allowed to back as much as $36.5 billion each in apartment building loans this year. The director of the agency that oversees Fannie and Freddie can raise or lower that amount.
The companies can underwrite an unlimited amount in loans for certain underserved markets and buildings with units set aside for low-income tenants.
Without Fannie and Freddie in the market, borrowers would either pay higher rates or not be able to get loans. In 2009, as credit markets seized up, the companies took on about 60% of apartment loans, according to the Mortgage Bankers Association, a trade group.
White House officials have already said they plan to overhaul housing finance, suggesting changes that may impact apartment lending. Some Republicans in the past have called for restricting Fannie and Freddie's apartment business, which could make projects more expensive to finance.