Fannie, Freddie have kept multifamily deals such as these flowing.
Red Capital Fannie, Freddie have kept multifamily deals such as these flowing.

Fannie Mae and Freddie Mac are finding solace in record-breaking multifamily business—perhaps an apt payback for the troubled government sponsored enterprises (GSEs), which are considered by many to be providing affordability and liquidity to the multifamily capital markets. In mid-July, shares of both companies tanked on reports that the housing crisis will likely extend into 2009 and an analyst's suggestion that accounting changes could leave the GSEs short on capital reserves. In an effort to assuage those concerns, the recent housing stimulus package authorized the U.S. Treasury Department to increase existing lines of credit to both institutions and/or buy stock in the GSEs for the next 18 months.

Despite murkiness in the single-family market, Fannie and Freddie both reported record-breaking first halves in 2008. At Fannie Mae, multifamily investment totaled $20 billion through June, $18.2 billion of which was powered by the company's Delegated Underwriting and Servicing lenders. According to Fannie Mae vice president of multifamily Heidi McKibben, the lack of activity among conduit lenders has provided ample opportunity for the mortgage giant to ramp up multifamily lending. “The stage was set for a very positive beginning to 2008 for us, with the conduits pulling out, and a return to more normal underwriting standards,” McKibben says. “At the same time, we are still enjoying very strong fundamentals for multifamily as an asset class. It is a great place to be.”

Freddie Mac also set new multifamily highs in the first half of 2008, achieving earnings of $118 million for the company's multifamily segment in the second quarter of 2008, compared to $84 million for the second quarter of 2007. “To be sure, multifamily is a positive spot among second-quarter results that collectively are not the greatest,” says Freddie Mac vice president of multifamily production Mitchell Kiffe.