Despite Troubles, Fannie, Freddie Are ‘Most Viable Form of Capital’ For Multifamily
- Jul 11, 2008
By Anuradha Kher, Online News EditorWashington, D.C.–Despite Fannie Mae and Freddie Mac shares falling and growing concern about possible government takeover, there are people in the multifamily industry who say that the two companies are not doing as badly as has been reported in the media.“Shares of Freddie have fallen and things are bad for them on paper, but in day-to-day life, it has not affected them at all,” Susan Blumberg, senior vice president of NorthMarq’s Chicago office, tells MHN. “We have a very strong working relationship with Freddie. The way we see it, the multifamily aspect of these companies has been very strong with low delinquencies. This is a knee-jerk reaction toward their single-family business.”Shares of Fannie Mae and Freddie Mac plummeted again today. Freddie Mac shares were down 24 percent from Thursday’s closing price, to $6.08 a share, and Fannie Mae stock fell 28 percent to $9.51 a share, in midday trading.Blumberg agrees that there might be a trickle down effect on multifamily lending as capital becomes more expensive due to falling shares, but she hasn’t seen it yet. “Deals are happening, commitments are being honored and Freddie’s capitalization and ability to raise capital has been continuing. What is happening with the shares is a result of the market conditions,” she says.“There is a feeding frenzy going on right now, but they will bounce back. They have always been there,” says Blumberg.The media is also reporting that senior Bush administration officials are considering a plan to have the government take over one or both of the companies and place them in a conservatorship if their problems worsen. “This is highly unlikely. I would hate to see a takeover because it is absolutely not necessary and it is not good for the company’s stability,” Blumberg says.In the wake of the foreclosure crises, Fannie Mae and Freddie Mac suffered. Now, as housing prices decline further and foreclosures grow, the markets are worried that Fannie and Freddie themselves may default on their debt, according to industry experts.But according to Blumberg, Fannie and Freddie capital is extremely competitive and still the most viable form of capital. “We saw a minor blip in spreads but nothing substantial,” she concludes.