Fannie Mae and Freddie Mac are basically pricing neck and neck at the beginning of the fourth quarter. Freddie does seem to have a slight advantage, just due to its inherent underwriting model. Yet, Fannie has the upper hand in terms of deal processing times.

Fannie programmatically uses underwriting floors—a tool for sizing loans—and it tends to limit proceeds. Freddie’s exit test, on the other hand, seems a little more forgiving. For 10-year deals, which are sized based on an underwriting floor of 5.5 percent, Fannie Mae has been very willing to consider flexibilities and grant waivers on that floor. But it’s on five- and seven-year deals where those floors become more significant, which means the waiver would have to be more significant.

“Sometimes, Fannie just can’t get all the way to where Freddie is going to be,” says Todd Goulet, senior vice president at Cleveland-based KeyBank Real Estate Capital. “In good markets, Freddie can get pretty aggressive on five- and seven-year money—it seems like more deals pass their exit test than Fannie.”

Yet, as the traditional fourth-quarter busy season gets under way, Fannie Mae features a quicker turnaround. Last year, Freddie Mac was absolutely crushed with business in the fourth quarter, exposing the chief Achilles' heel of its “prior review” underwriting model. And with rates as low as they’ve been, the company expects to see high demand in the closing months of the year.

Freddie made some moves to open up that bottleneck—hiring third-party underwriters and improving its internal technology—but Freddie Mac’s stream remains partially damned. “What was historically a 60-day process—and if you needed it quicker, you could get it—is now more of a 75-day process,” says Goulet. “And it’s hard to do it in less than 60 now, even if you need to.”

The ongoing “brain drain” at the government-sponsored enterprises (GSEs) is also conspiring to slow things down. Over the past year, Freddie Mac lost not only its head of multifamily, Mike May, but many of its regional directors, as well. It’s difficult to address an increase in volume if you have to refill key positions at the same time. Fannie Mae is beginning to feel some stress there too.

“Both GSEs are working hard to support their growing business, and Freddie Mac has been adding positions. The hope is that Fannie Mae will be able to add as well,” says Grace Huebscher, president and CEO of Bethesda, Md.–based Beech Street Capital. “We’re hopeful the regulators won’t encourage downsizing, which would be a big mistake, especially in the multifamily business.”

The GSEs are expected to again capture about 60 percent of the market for permanent multifamily debt this year, same as in 2010. And even as they have faced more competition this year from life insurance companies, banks, and even the occasional conduit lender, the GSEs will again win the majority of the market in 2012.

“Their market share might fall, but I don’t think it’s going to fall all that much for a while,” says Don King, head of GSE production at Boston-based CWCapital. “Conduits don’t appear to be an issue, and commercial banks don’t seem to be lending all that much. Life companies will be a factor, but their high-water mark was under 10 percent of the total market anyway, so it won’t have a huge impact.”