FINANCE: Fannie Mae Announces it is Boosting Investments in the Multifamily Sector

By Keat Foong Executive Editor Washington, D.C.—In a week in which the Government Sponsored Agencies (GSEs) faced sudden, sharp declines in their share prices and reportedly falling investor confidence, Fannie Mae affirmed its commitment to the multifamily industry and said it was bolstering its investment in the sector. Fannie Mae held a teleconference on Wednesday to announce that it was increasing its participation in key multifamily segments: small loans, seniors housing, military housing and government-assisted affordable housing. The agency suggested it was helping to maintain the “liquidity, stability and affordability” of sectors, many of which are being negatively affected by current credit conditions. “Fannie Mae is increasing our product offerings to provide additional liquidity to meet the changing market needs,” said Phil Weber, senior vice president of multifamily at Fannie Mae, in a statement. Weber also announced that Fannie Mae has invested $20 billion in multifamily housing in the first half of 2008. He acknowledged the multifamily financing market is smaller this year—$65 billion to $70 billion according to company estimates, compared to $115 billion to $120 billion last year—because there is less sales and financing activity. Nevertheless, he said that an “apples-to-apples” comparison of the agency’s debt financing activity this year, including credit enhancements, shows a “pretty good increase” from 2007. Also, he said, “It is fair to say our market share of the multifamily market has increased significantly from last year.” • Fannie Mae announced it is increasing its commitment to purchase small multifamily loans of up to $3 million, or $5 million, in high-cost areas. The company invested about $5 billion in small loans in the first half, compared to $3 billion in the same period last year. • In the area of seniors housing, Fannie Mae said it has provided over $1 billion for the segment in the face of declining seniors housing properties sales from the record pace of 2006-07 and the greater challenge of investing in the sector because of credit conditions. Fannie Mae said it has increased its staff to serve the sector and has a multi-billion production goal for the year.  • Fannie Mae said it sill help restore stability to the military housing market by buying up to $1 billion in military housing bonds, compared to $773 million invested last year. • And in the area of affordable housing, Fannie Mae stated it will “also help restore liquidity to the affordable multifamily bond market by continuing to offer” its Bond Credit Enhancement product. However, the company, which has pulled back from buying Low Income Housing Tax Credits (LIHTC), did not announce it will resume purchase of LIHTCs. Officials said in the teleconference that the company’s appetite for such tax credits will depend on its taxable income and that it remained very interested in the space. This week of July 7, Freddie Mac stock has reportedly fallen 43 percent while Fannie Mae share prices have dropped 40 percent. Investors are said to be panicky about increased losses at both companies stemming from the housing downturn, and the GSEs’ ability to raise capital going forward. Treasury Secretary Henry M. Paulson Jr. has assured investors that “our primary focus is supporting Fannie Mae and Freddie Mac in their current form as they carry out their important mission.”Both Fannie Mae and Freddie Mac have issued statements stating that they remain financially viable. And in the area of multifamily financing, Weber affirms that the company’s view of the multifamily business is that the fundamentals remain “solid.”