FANNIE MAE PROVIDED $19.8 billion in multifamily debt last year, and Freddie Mac was close behind with $16.6 billion in 2009. The figures represent a steep decline from the previous year, with Fannie Mae's volume down 45 percent, while Freddie Mac's was down nearly 30 percent.

But even as the overall size of the multifamily debt market shrunk, the governmentsponsored enterprises (GSEs) increased their market share. Freddie Mac saw the highest market share in its history at 37 percent, up from 29 percent in 2008.

Both GSEs made securitization a focus last year. More than 80 percent of Fannie's business last year was done via MBS execution, compared to just 17 percent in 2008.

Freddie Mac's Capital Markets Execution program also made a big splash last year, with 27 percent of the company's overall production going through CME. The company hopes to amp up the program further and process about half of its volume this year through CME.

For Fannie Mae, nearly every loan type saw dramatic declines last year, except for manufactured housing, which jumped from $1 billion in 2008 to $1.1 billion in 2009. (Although Freddie Mac doesn't currently offer a manufactured housing program, the company plans to roll out such a product later this year.)

While Freddie's numbers were similarly down, there were some key areas of growth. The GSE saw healthy demand for student housing mortgages last year, processing about $775 million in student deals versus the $580 million it processed in 2008.

Freddie Mac also closed about $4.1 billion in Capped ARM loans, up from $3 billion in 2008, benefitting from reduced competition. Fannie Mae put much less emphasis on variable rate offerings last year, a trend that will continue in 2010.

Both GSEs made aggressive underwriting changes in 2009. Notably, the GSEs tightened up on cash-out refinancings, raising the debt service coverage ratio (DSCR) to 1.30 from 1.25, and lowering loan-to-value (LTV) ratios to a maximum 75 percent, down from 80 percent. “All we did was go back to the basics,” says Ken Bacon, executive vice president of Washington, D.C.-based Fannie Mae. “I wouldn't change a thing.”

But Freddie Mac thinks it might have gone too far in some of its adjustments. “Refis are an area we're talking about; we're wondering if we're missing some business because we're being a little too conservative,” says Mike May, senior vice president of McLean, Va.-based Freddie Mac.

Portfolio Cap Lift

In late December, the Treasury Department announced it would provide unlimited support for the GSEs through 2012, extending the conservatorship for another few years. The Treasury also made it easier for the GSEs to manage the size of their portfolios. Originally, 10 percent of the companies' existing portfolios had to be jettisoned annually, beginning this year. The December announcement, however, changed that figure to 10 percent of the maximum allowable portfolio cap of $900 billion per institution.

Technically, the GSEs can offer more portfolio loans at better prices than they have since being seized by the government. But the GSEs' focus on securitization won't diminish anytime soon, as neither company is in any rush to hit its maximum allowable portfolio limit.