EDITOR’S NOTE: Business as Usual…for Now

By Keat Foong, Executive Editor As the government places Fannie Mae and Freddie Mac in conservatorship, what we can keep in mind for now is that the plan reportedly is meant to allow for the continued operations of the two companies while the rescue is taking place. That means that in the short-run at least, it may still be more or less “business as usual” in terms of the funding of multifamily housing by these two Government Sponsored Agencies (GSEs). Afterall, one of the bigger overarching goals of the government is to ensure that the two agencies prop up the housing market by continuing to buy housing mortgages. That is of critical importance for the economy. So it appears unlikely the government would intend to disrupt Fannie Mae and Freddie Mac’s financing activities for now.    So far, it appears no major change is expected where the agencies’ approach to multifamily financing is concerned. If anything, the general expectation is that the bailout lays the ground for the cost of loans, whether for commercial multifamily or for-sale residential, to fall somewhat as investors regain confidence in the GSE securities. Already,  spreads for the companies’ debt had narrowed substantially on Monday as investors reacted to the news.  The danger points lay in the future—especially in the plans for Fannie Mae and Freddie Mac post-rescue. Options that are mentioned include nationalizing the GSEs, which it is said can lead to smaller portfolios—not good for multifamily. Or they can be privatized, with the government no longer backing the companies. This last option is opposed by Democratic lawmakers. While both Presidential hopefuls, Senator Barack Obama and Senator John McCain, have come out in support of the bailout, Senator McCain’s camp has also reportedly said he will privatize the GSEs. We shall see, but for now, borrowers may have no need to rush out to refinance or such as no drastic changes have yet been forecasted in the nature of Freddie Mac and Fannie Mae multifamily financings. Stay tuned.