Stephen Voss

AS WE ENTER another heated election season, perhaps no single issue touches as many multifamily players as housing finance reform.

Apartment Finance Today recently sat down with Shekar Narasimhan, managing partner of McLean, Va.–based Beekman Advisors, to discuss that topic, as well as several others. Here, he predicts how things might shake out once the dust settles and a decision maker has been chosen to steer the fate of the housing industry for the next four years—and beyond.

After the election, what are the odds of Freddie Mac and Fannie Mae spinning off their multifamily divisions into stand-alone entities?

I think there's a 20 percent possibility. I'm an advocate of there being stand-alone businesses, and I think it's viable. But the difficulty is, you need to have a government backstop in place for the securities they're issuing. You want the government's footprint to be as minimal as possible while maintaining its ability to step in in situations when it's needed. But I think they could both generate significant returns.  

The Treasury Department recently changed the terms of Fannie's and Freddie's repayment of bailout funds. What's behind that change?

The Treasury is saying, “Forget the 10 percent dividend we've been collecting; we don't need to do that anymore. We'll take all the profit.” By accelerating the winddown, it's making it clear that it isn't trying to build small businesses here.

Where does the FHA fit into the housing finance reform debate?

I think it's a big part of the debate, even though it can't be a huge part of the market because of its very closed process. It's limited by itself, which is OK. We want the agency to be available so that it's responsive, but it can't be much more than it is, the way it's structured.

How do you think the election will affect housing finance reform?

If Obama is re-elected, odds are we're in for a period in which the focus is going to be on the deficit and the debt ceiling. But a new secretary of Treasury could change things. If Romney is elected, I think the debate becomes, “Do we want these entities at all?” There's more uncertainty with a Romney [victory]. In either case, nothing is likely to happen until 2014.

Will government guarantees still be made available to Freddie and Fannie?

Absolutely. They have to be. I expect that Freddie and Fannie represent as much as 65 percent of all multifamily loans. And if you include the FHA, it's more like 75 percent. Single-family is closer to 80 percent. I can't imagine anyone coming in and yanking out the guarantees from under them.