October 10, 2012
This week, NCSHA received a report from the U.S. Government Accountability Office entitled, “Mortgage Financing: Fannie Mae and Freddie Mac’s Multifamily Housing Activities Have Increased,” which examines the role that Fannie Mae and Freddie Mac (the enterprises) play in providing financing for multifamily properties, with five or more units.
GAO completed the report in response to a congressional request to describe: (1) how the enterprises’ multifamily loan activities have changed; (2) the enterprises’ role in the multifamily financing marketplace and how they met their affordable housing goals; and (3) how the enterprises’ multifamily delinquency rates compare with those of other mortgage capital sources and how they have managed their credit risk.
The GAO found that from 1994 through 2011, the multifamily loan activities of Fannie Mae and Freddie Mac generally increased. In recent years, according to the report, the enterprises have played a large role in the multifamily marketplace and their multifamily activities have contributed considerably to meeting their affordable housing goals. The enterprises have purchased multifamily loans that generally performed as well or better than those of other market participants, but the FHFA has identified deficiencies in their credit risk management. Both enterprises have been taking steps to address these deficiencies.
NCSHA and six state HFAs worked closely with the GAO during its research process. GAO analyzed loan-level data on the enterprises’ median debt-service coverage, loan-to-value (LTV) ratios, and delinquency rates and compared them to six HFAs, as well as three loan consortia. The GAO also discussed with NCSHA the role of the enterprises in multifamily housing financing, the reliability of the data gathered, and the extent to which the enterprises have engaged in risk-sharing with the Federal Housing Administration (FHA) and Rural Housing Service (RHS).
The report observes that the enterprises have supported state HFAs by providing credit enhancements to tax-exempt bonds used to finance affordable multifamily housing. The GAO interviewed state and local HFAs, which generally viewed the enterprises as important players in providing liquidity for affordable multifamily properties. GAO also notes that the enterprises have participated in the New Issue Bond Program (NIBP) and the Temporary Credit and Liquidity Facilities (TCLF) program.
For more information, please contact Ellen Lurie Hoffman.