The Federal Housing Finance Agency (FHFA) wants to see if the multifamily businesses of Fannie Mae and Freddie Mac can be spun off and privatized.
“Unlike the single-family credit guarantee business, each Enterprise's multifamily business has weathered the financial crisis and generated positive cash flow,” according to FHFA's new strategic plan for managing the GSEs over the next few years.
The GSE regulator will instruct Fannie and Freddie to conduct a “market analysis of the viability of its multifamily operations without government guarantees.”
The analysis will consider how much capital would be required for the multifamily units to survive as stand alone entities — and how such a move might impact loan pricing.
“This is really meant to be an assessment process. We don't have a predetermined outcome,” FHFA acting director DeMarco told ASR sister publication National Mortgage News Wednesday afternoon.
The strategic plan notes several reasons for moving forward with privatizing MF: the multifamily market is healthy with rising rents, declining vacancies and low delinquency rates; Fannie and Freddie are key players in the MF market but don't dominate like they do in single-family; the GSEs are much further along in terms of risk sharing with multifamily lenders and investors than on the single-family side.
FHFA noted that currently there is strong demand for employees with MF experience and both GSEs have “lost key personnel” to private sector firms.
Separately, several multifamily trade groups welcomed FHFA's strategic approach.
"We would encourage FHFA to pursue separate timetables for addressing the GSEs' single-family and multifamily programs,” according to a statement from the National Multi Housing Council and National Apartment Association. “The multifamily solution should be expedited and not held back while solutions to the far more complex single-family problems are sought.”