Fannie and Freddie currently back about 45% of the multifamily market, according to a Bloomberg report. But the Federal Housing Finance Agency wants to scale that back, adding to a 10% cut in apartment financing Fannie and Freddie made this year as part of an effort to move more risk to private capital, according to Bloomberg. The size of next year’s cut hasn’t yet been determined.
Industry groups and affordable-housing advocates are decrying the proposed cuts, saying they could make it harder for new rental housing to be built in rural areas and smaller cities.
“Without Fannie and Freddie our ability to get deals done in smaller towns would be greatly reduced,” E.J. Burke, chairman of the Mortgage Bankers Association, told Bloomberg. “We haven’t seen that impact yet, but down the line I’m very concerned if the conservator continues to cut their volumes.”
But FHFA officials respond that Fannie and Freddie still have a larger footprint in the multifamily market than they did prior to the financial meltdown, and FHFA Acting Director Edward DeMarco said in an Oct. 24 speech that the industry dealt with this year’s cut “without major disruption.”
“We will continue to take gradual steps to reduce the enterprises’ exposure in this market, while maintaining a market presence,” DeMarco added.
DeMarco seems to have a knack for making unpopular decisions. His plan to reduce the maximum loan limits for Fannie and Freddie has also met with industry-wide condemnation.
The agency that oversees Fannie Mae and Freddie Mac is going ahead with plans to scale down their financing of multifamily mortgages next year despite heated opposition from industry groups.