Government-Backed Financing Entities Only Players in Multi-Family

According to the latest issue of Multifamily Executive magazine, the multi-family market is being buoyed by loans from Freddie, Fannie, and HUD-backed FHA loans. The bad news is that for buyers or developers unwilling or unable to get financing from these sources, there’s virtually no other alternative right now.

Although rumors are starting to circulate that insurance companies whose investment portfolios have improved recently might re-enter the market, it’s unclear how they would be able to compete with the GSEs. That may change depending on the continued solvency of the GSEs. Right now they have healthy multi-family loan values and their default rate is below 0.5%, in contrast to the 3.13% rate that commercial banks report. However, a recent GAO report indicates “that Fannie and Freddie stand to bleed $400 billion by the time the issue of the conservancy is resolved.” This may make it more difficult for legislators to continue supporting Fannie and Freddie in their current status.

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