Fannie Mae has provided $5.9 billion in investment to the multifamily rental housing market in 1H10.

Fannie Mae Multifamily has increased its MBS business since focusing its efforts on securitization and broadening the investor base in 2009. The firm now provides liquidity to the multifamily market mainly via MBS issuance. Of the $5.9 billion invested in 1H10, $5.5 billion was delivered through MBS execution.

"In today's constrained market, Fannie Mae and our Delegated Underwriting and Servicing (DUS®) lender partners remain diligent about providing much needed liquidity and stability," said Kenneth Bacon, Executive Vice President of Fannie Mae's Housing and Community Development division. "Despite challenged fundamentals, we are beginning to see an uptick in commitment activity and continue to manage credit risk by maintaining prudent lending standards and asset quality for new loans. Fannie Mae's commitment to sustainability and support of the DUS lenders help us in our efforts to stabilize the market."

Various reports released during the past month suggest that the multifamily market bottomed in 4Q09 and began to improve in 1H10.

According to preliminary information from data provider Reis, the multifamily vacancy rate decreased from 8.0% to 7.8% – the first decline in two years. Additionally, multifamily occupancy in the second quarter improved in 67 out of 82 markets monitored by Reis .

Multifamily construction is also showing the first signs of recovery: permits rose to 145,000 in June from about 92,000 in January 2010 and starts increased to 88,000 from 49,000 for the same period .

However, Barclays Capital analysts said that the immediate implications for the CMBS market will likely be muted given the generally lagging nature of this collateral.

The improvement in the multifamily sector will likely be first felt through improving fundamentals via better loss severities projections and higher probability of payoff at or prior to maturity before any impact on loans that are near or even below their 1.0 DSCR coverage, analysts said .

Barclays analysts said it will also lead to a higher probability of liquidations as well as lower probability of extensions and modifications for distressed CMBS assets.

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