Without a government guarantee, the multifamily loan programs run by Fannie Mae and Freddie Mac would be reduced in nonprime lenders that would be dependent on the private securitization market or private investors to be viable.
That is the conclusion of studies conducted by Fannie and Freddie at the request of the Federal Housing Finance Agency.
“We conducted a careful, measured analysis that flowed solely from the assumptions and questions that we were provided by FHFA,” according to Fannie senior vice president Jeffery Hayward.
“Our analysis found that, without a government guarantee, a successor to our current model would not be able to provide the same level of liquidity to the market throughout market cycles, and likely would not serve many of the markets we have historically served,” Haywood said.
Through their network of multifamily lenders, Fannie and Freddie focus mainly in
As private entities, it may not be practical to provide loans for small multifamily properties due to the high cost, relative low profitability and difficulties with securitization.
“The reports conclude that without government guarantees, the multifamily businesses have little inherent value,” the FHFA says. And the “sale of these businesses would return little or no value to the U.S. Treasury or to taxpayers.”
