For those concerned about where Fannie Mae is going in 2009, the GSE says not to worry, it will be around. But that doesn't mean there won't be changes.

Fannie plans to stimulate its mortgage-backed security (MBS) and delegated underwriting and servicing (DUS) business and broaden the investor base. Its focus will shift from primarily being a multifamily portfolio lender to acting as a lender that provides liquidity to the multifamily market primarily through MBS issuance. It's already reaching out to its DUS lenders and dealers to increase interest in this execution.

This is good news, says Ed Pettinella, CEO of Home Properties, a REIT in Rochester, N.Y., and a big Fannie borrower. "They are just reiterating their continued support of the multifamily sector and that they are going to put more emphasis on the DUS lending program, which should be good news of us."

Matt Wanderer, principal of Miami-based Alterra Capital Group, is seeing increased debt service ratios and lower loan-to-value ratios from both Fannie Mae and Freddie Mac, reducing the gap between agency and conventional lenders. He also thinks that Fannie and Freddie entering into the secondary MBS market might have the potential to help revive the MBS markets.

"Maybe it will establish a middle ground between Fannie and Freddie pricing and bank pricing," Wanderer says.

Already, the DUS business is responsible for the lion's share of Fannie's business. Of 2008's $35.5 billion in multifamily housing with debt financing through lender partners and bond purchases, $33.3 billion came through Fannie's DUS lender and $21.8 billion of that amount was in DUS product. DUS lenders have more financing flexibility than conventional lenders.

"Fannie Mae provided liquidity and stability to the multifamily market almost exclusively through its DUS lenders in 2008," says Phil Weber, senior vice president of multifamily at Fannie Mae. "The demand for DUS product from borrowers substantially increased in 2008."

Fannie is also making changes in expectation of a bloodbath in 2009. Economic struggles are expected to worsen in 2009, creating even more of a challenge for Fannie. With job losses adding up, household formations will slow, and apartment owners will suffer.

"In the near term, fundamentals of the multifamily market will come under pressure, and Fannie Mae is taking steps to mitigate risks associated with weak rental demand," said David Worley, senior vice president of risk management for housing and community development at Fannie Mae, said in a statement. "We are committed to maintaining strong credit standards with a greater focus on loans with higher debt service coverage and lower loan-to-value ratios. We have also boosted our asset management team."

That's a good thing, says Dan Fasulo, managing director for New York-based research firm Real Capital Analytics. "The one item that differentiates the multifamily sector from the other property types is the availability of GSE debt," Fasulo explains. "The multifamily market is the closest thing we have to a normal market because the government is in there lending. It's the only game left. Some regional banks and local banks are lending for their own portfolio, but those types of institutions only have a finite amount of capital that they can put out."

Still, if Fannie's plan to stimulate the MBS market works, the industry could eventually see more players in that market.

Here's a look at the other highlights from Fannie's 2008 figures, reported earlier this week:

    • Fannie saw strong demand from its Early Rate Lock (ERL) product because borrowers were concerned about rates rising. Those ERL loans rose from $4.6 billion in 2007 to $10 billion in 2008, a 116 percent increase.
    • Of the units financed by Fannie in 2008, 89 percent were affordable to families at or below the median income of their communities.
    • About 54 percent of Fannie's units served special affordable families (low- and very-low-income families in low-income areas).
    • Nearly 58 percent of the multifamily units financed by Fannie in 2008 were in underserved markets.