Bibby: Spin Out the GSE Multifamily Divisions

ByDoug Bibby, Multi-Family Executive Magazine

Ever since the federal government bailed out Fannie Mae and Freddie Mac in 2008, policymakers and stakeholders have struggled with the question of what to do with these challenged but fundamental components of the nation’s mortgage finance system. Most generally agree that the two government-sponsored enterprises (GSEs) can’t survive in their present form. Finding the right fix, however, is anything but simple, given the size of the GSEs’ footprint in housing finance. Fannie and Freddie’s multifamily lending may make up a smaller portion of their portfolios than their single-family businesses, but the GSEs’ multifamily programs have been quite successful. They have default rates of less than 1 percent—just a tenth of the default rates in the single-family sector—and have produced roughly $7 billion in profits for the federal government since being placed in conservatorship. But the gravity of the problems with Fannie and Freddie’s single-family mortgage financing programs is overshadowing this proven multifamily track record. And as GSE reform evolves, a single-family focus could cost the apartment industry a critical source of financing, undercutting its ability to provide quality housing for the nearly 100 million Americans who rent. Whither Alternative Financing? From the beginning of 2008 through the third quarter of 2011, the GSEs have provided $144 billion in financing to the multifamily industry. This represents roughly 55 percent of the debt accessed by the industry, with traditional financing sources such as banks and life companies providing the remaining capital. This means that since 2008, one in every two apartments would have been unable to secure construction financing or refinance existing loans without the GSEs. Some argue that alternative sources of capital could fill the financing gap if the GSEs were to exit the marketplace. However, this scenario is unlikely given various market constraints. Banks are limited by capital requirements and continue to work through troubled balance sheets resulting from the stagnant economy. Life insurance companies, which have historically provided less than 10 percent of the industry’s capital, lend primarily for newer, high-end properties and are somewhat inconsistent, entering and exiting the multifamily market based on changing investment needs and economic conditions. Moreover, the private-label CMBS market is unlikely to return to the volume and market share it reached a few years ago. And, finally, the Federal Housing Administration, which ramped up its multifamily financing activities through the housing downturn, has exceeded its lending capacity. Maintaining adequate liquidity in the debt markets will be more critical in the future as America increasingly relies on rental housing. The apartment industry needs to build an estimated 300,000 units a year to meet expected demand. Yet, we started just 167,400 in 2011, just barely enough to replace the units lost to demolition and obsolescence. Without some degree of government credit support, the apartment industry’s supply–demand imbalance will become more acute, driving up the cost of rental housing. A Stand-alone Proposal With private capital sources unable to fully meet the apartment industry’s financing needs, it’s important to find a solution to the GSE question that will ensure that the industry continues to have access to capital to meet increasing rental housing demand in markets nationwide. At the same time, the solution must be flexible enough to allow the private capital market to assume a larger financing role as the economy continues to recover. Given the GSE multifamily programs’ record of success, the National Multi Housing Council (NMHC) believes such a solution could involve spinning out Fannie and Freddie’s multifamily businesses into stand-alone and independently capitalized entities, creating a framework that would maintain liquidity in the market while fully compensating taxpayers for rescuing Fannie and Freddie. Key elements of such a proposal would include:

• Establishing new, stand-alone entities. Each company’s multifamily platform would need to transfer to new successor entities. Taxpayers would be compensated for the value of Fannie and Freddie’s holdings.

• Retaining a federal credit guarantee. A federal credit guarantee would be tied to the security, a necessary provision to attract global investors. However, unlike today, neither the GSE-successor entities nor their shareholders would be eligible for a guarantee, forcing them to absorb all losses. Furthermore, the credit guarantee would be priced to prevent the GSE-successor entities from receiving capital at preferential rates and crowding out private-debt providers.

• Setting up critical taxpayer protections. The GSE-successor entities would be obligated to pay a fee to the government covering the entire cost of the guarantee. The entities also would have to hold significant levels of risk-based capital. And last but not least, the entities would be required to retain risk in each mortgage to support prudent underwriting.

• Empowering a strong regulator. This entity would be charged with establishing and enforcing effective capital standards and reserves, as well as monitoring and assessing performance to ensure a competitive private-debt market. With the strength of this framework, the NMHC is working to further develop its proposal with input from key stakeholder groups. The end goal is to provide lawmakers and regulators with a road map for addressing the multifamily sector’s capital concerns and ensuring that adequate liquidity remains available in all markets at all times as more wholesale GSE reform is enacted. A complete outline of the proposal is available at

Leave a comment ?


  1. I love your wp design, where did you get a hold of it?

  2. Hi my friend! I wish to say that this article is amazing, great written and include almost all important infos. I’d like to peer more posts like this.

  3. It’s really a nice and helpful piece of information. I am glad that you shared this useful info with us. Please keep us informed like this. Thanks for sharing.

  4. Please let me know if you’re looking for a article writer for your weblog. You have some really great posts and I feel I would be a good asset. If you ever want to take some of the load off, I’d really like to write some articles for your blog in exchange for a link back to mine. Please blast me an e-mail if interested. Many thanks!

  5. Great write-up, I’m normal visitor of one’s web site, maintain up the excellent operate, and It is going to be a regular visitor for a lengthy time.

  6. F*ckin’ tremendous things here. I’m very glad to peer your post. Thank you so much and i am taking a look forward to touch you. Will you kindly drop me a mail?

  7. Several thanks just for this certain data I has been basically searching all Engines like google to learn it!

  8. Gday! I hope you don’t mind but I decided to post your weblog: to my internet directory website. I used, “Bibby: Spin Out the GSE Multifamily Divisions | DSD Investor Group, Inc” as your web site title. I hope this is fine with you. If perhaps you’d like me to change the title or remove it entirely, email me at Thanks.

  9. Sweet blog! I found it while surfing around on Yahoo News. Do you have any suggestions on how to get listed in Yahoo News? I’ve been trying for a while but I never seem to get there! Cheers

  10. I always was interested in this topic and stock still am, thanks for posting.

  11. Hello. magnificent employment. I failed to expect this. This is a great story. Thanks!

  12. I dugg some of you post as I thought they were handy very beneficial

  13. Thank you for another exceptional post. Exactly where else could anybody get that kind of data in this kind of a perfect way of writing? I’ve a presentation subsequent week, and I am towards the appear for such information and facts.

  14. Rattling good visual appeal on this site, I’d value it 10 10.

  15. Write more, thats all I have to say. Literally, it seems as though you relied on the video to make your point. You clearly know what youre talking about, why throw away your intelligence on just posting videos to your weblog when you could be giving us something enlightening to read?

  16. Excellent write-up , I am going to spend more time learning about this topic

  17. Hi there! This is my first comment here so I just wanted to give a quick shout out and say I genuinely enjoy reading through your posts. Can you recommend any other blogs/websites/forums that go over the same topics? Many thanks!

  18. really good, dont like web sites, find a lot of the ideas obtain

  19. Wow! This could be one particular of the most beneficial blogs We have ever arrive across on this subject. Actually Great. I’m also an expert in this topic therefore I can understand your hard work.

  20. You made a number of good points there. I did a search on the issue and found most people will have the same opinion with your blog.

  21. Magnificent web site. Lots of helpful info here. I’m sending it to a few buddies ans additionally sharing in delicious. And naturally, thank you to your effort!

  22. It’s actually a great and useful piece of information. I’m satisfied that you just shared this helpful info with us. Please stay us up to date like this. Thanks for sharing.

  23. I do agree with all the ideas you’ve presented in your post. They are really convincing and will certainly work. Still, the posts are very short for starters. Could you please extend them a bit from next time? Thanks for the post!!

  24. I am extremely impressed with your writing skills as well as with the layout on your blog. Is this a paid theme or did you customize it yourself? Either way keep up the excellent quality writing, it is rare to see a great blog like this one these days..

  25. I sorry not speak good English.I relish, cause I found just what I was taking a look for. You have ended my 4 day long hunt! God Bless you man. Have a great day. Bye

  26. Someone essentially help to make seriously articles I would state. This is the very first time I frequented your web page and thus far? I surprised with the research you made to create this particular publish extraordinary. Wonderful job!

  27. wonderful publish, very informative. I wonder why the opposite experts of this sector do not realize this. You must proceed your writing. I am sure, you’ve a huge readers’ base already!

  28. My sister sent me here and I’m pleased! I will definitely save it and come back!

  29. Spot on with this write-up, I truly think this website needs much more consideration. I’ll probably be again to read much more, thanks for that info.

  30. Thanks for sharing superb information. Your web-site is very cool. I am impressed by the info that you’ve on this blog. It reveals how nicely you understand this subject. Bookmarked this web page, will come back for extra articles.

  31. Many thanks for sharing around, In my opinion , neutral quite shows off

  32. Hey! I just need to say that we favor your publishing method which so Im hoping to follow your blog often to any extent further Keep creating!

  33. This design is incredible! You certainly know how to keep a reader entertained. Between your wit and your videos, I was almost moved to start my own blog (well, almost…HaHa!) Excellent job. I really loved what you had to say, and more than that, how you presented it. Too cool!

  34. Hi! I just wanted to ask if you ever have any issues with hackers? My last blog (wordpress) was hacked and I ended up losing months of hard work due to no data backup. Do you have any methods to prevent hackers?

  35. Howdy! Someone in my Myspace group shared this site with us so I came to give it a look. I’m definitely enjoying the information. I’m book-marking and will be tweeting this to my followers! Excellent blog and wonderful design.

  36. Thank you for the good writeup. It actually used to be a entertainment account it. Glance complex to far brought agreeable from you! However, how could we be in contact?

  37. Youre not the overall blog writer, man. You certainly have something vital that you bring about the world wide web. Such an excellent blog. Ill keep coming back again with regard to further.

  38. Thank you a great deal for your post. Really thanks! Really great.

  39. Glad to be one of several visitors on this awe inspiring site : D.

  40. I too think so , perfectly indited post! .

  41. This is the precise weblog for anyone who desires to find out about this topic. You understand a lot its virtually hard to argue with you (not that I truly would want…HaHa). You definitely put a new spin on a subject thats been written about for years. Nice stuff, simply great!

  42. Woh I like your weblog posts, saved to fav! .

  43. Hey there! Would you mind if I share your blog with my zynga group? There’s a lot of people that I think would really enjoy your content. Please let me know. Thanks

  44. Thank you for your article. Excellent.

  45. I have learn several excellent stuff here. Definitely value bookmarking for revisiting. I wonder how much effort you place to create the sort of excellent informative web site.

  46. Keep it up, very impressive|insightful|good job|work.

  47. This really answered my problem, thanks!

  48. so much good information on here, : D.

  49. I got what you intend,bookmarked , quite decent internet web site .

  50. I would like to show my personal appreciation for you just for rescuing me out of this particular issue. Right immediately after searching throughout the online world and experiencing things that have been not enjoyable, I assumed my entire life was above. Living with no presence of ways of the troubles you’ve solved with this guide is a critical circumstance, as properly as ones which can have in a very wrong method damaged my personal career if i hadn’t find the weblog. The expertise and kindness in taking good care of many things was crucial. I am unsure what My spouse and i would’ve done only hadn’t identified such things like this. I can now relish our future. Thanks very much for your own professional and result focused guide. I won’t think hard to recommend the web site to anybody who needs guidelines on this subject subject.

  51. I take pleasure in, lead to I discovered just exactly what I was previously having a try to find. You’ve ended my four day long hunt! God Bless you man. Have a fantastic day. Bye

  52. Thank you for visiting my page! Smiling Tramadol Online

  53. Write far more, thats all I’ve to say. Literally, it seems as though you relied on the video to make your point. You surely know what youre talking about, why throw away your intelligence on just posting videos to your site when you can be giving us something enlightening to read?

  54. you’re actually a excellent webmaster. The web site loading velocity is amazing. It seems that you’re doing any distinctive trick. Furthermore, The contents are masterwork. you have performed a wonderful job in this matter!

  55. Your grasp of this topic is amazing. It really touched base to me and I’m glad I positioned this material. Thank you rather considerably.

  56. Hey There. I found your blog using msn. This is a really well written article. I’ll be sure to bookmark it and return to read more of your useful info. Thanks for the post. I will certainly return.

  57. I’m still learning from you, while I’m trying to achieve my goals. I certainly love reading everything that is posted on your site.Keep the information coming. I liked it!

  58. I’ve learn some good stuff here. Certainly price bookmarking for revisiting. I wonder how so much effort you place to create such a great informative web site.

  59. I got what you intend,saved to my bookmarks, very decent web site.

  60. Very interesting topic, appreciate it for posting.

  61. Hello.This post was really motivating, particularly since I was looking for thoughts on this topic last Thursday.

  62. Generally I don’t read article on blogs, but I would like to say that this write-up very forced me to try and do it! Your writing style has been surprised me. Thanks, quite nice post.

Leave a Comment

NOTE - You can use these HTML tags and attributes:
<a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <s> <strike> <strong>

+ 4 = nine