As Freddie Mac gains ground with aggressive new programs and increased flexibility for its delegated lenders, Fannie Mae’s recent multifamily reorganization comes none too soon for lenders who have complained that Fannie Mae was falling behind and risked losing further ground to Freddie Mac.

Although Delegated Underwriting and Servicing (DUS) lenders don’t want to bite the hand that feeds them, consolidation in the industry has brought many of them under the same corporate roof as Freddie Mac and even Federal Housing Administration lending programs, giving them multiple options to offer developers seeking financing.

Richard Lawch, Fannie Mae senior vice president of multifamily, recognizes these concerns and knows that the key to holding on to Fannie Mae’s lead in multifamily financing is to offer more flexibility than its previous programs have had.

The DUS program, while still Fannie Mae’s flagship program, is 14 years old and the world is changing, Lawch said. Borrowers used to be made up of entrepreneurs, but now there are more institutional players, he added, noting that real estate investment trusts make up 10% of the market now.

Competition in the marketplace isn’t the only challenge for Fannie Mae these days. It is also under intense pressure from the federal government as the result of accounting problems that reached a nadir in December when the Securities and Exchange Commission ordered the company to restate four years of earnings. Fannie Mae is likely to face continued regulatory and possibly legislative heat in 2005.

To strengthen its sales and product expertise, Fannie Mae is increasing the number of its national account managers by 25%, Lawch said. Lenders and borrowers will have quicker access to the latest capital reports and financing resources, he added.

Fannie Mae has reorganized its various multifamily operations into five distinct business channels. Assigning staff members to specific operations will make it easier for lenders and borrowers to contact the right people. Staff members could also be more innovative in underwriting their products because they are assigned to work specifically in one channel, said Lawch.

These channels of operation and their supervisors are: standard flow (DUS), John Powell, vice president; small loans (of $3 million or less), Richard Wolf, director; structured transactions and credit facilities, Grace Huebscher, vice president, Gerry LaHaie, vice president; affordable housing (debt and equity), Ed Neill, vice president; and pooled transactions, Todd Watkins, director.

Forming these pipelines will help strengthen certain operations that had been lacking focus and dedicated personnel, such as small loans and pooled transactions, said Lawch. DUS lenders will get to decide which channels they want to participate in.

Lawch expects that the “synergism” of combining affordable housing debt and equity will make Fannie Mae a more significant contributor to affordable housing production.

Fannie Mae can now touch and get creative with each individual loan, just like Freddie Mac does, Lawch added.

Some lenders remain skeptical about any positive impact from the reorganization. They say that Fannie Mae’s problems can be cured only by bringing in new and more aggressive leadership, not by rearranging the organizational chart.

Others are more hopeful. “The reorganization should result in a more streamlined business model, with faster and better turnarounds and DUS customer service,” according to American Property Financing, a DUS lender.

“The real thing is that [the reorganization] sharpens our focus and accounting,” said Huebscher. Fannie Mae’s market share of the structured transactions she heads has been below 10%, and now she is thinking of how she can better compete against life insurance companies.

One step is to reach out beyond Fannie Mae’s top 40 borrowers in large loans to the next 40 or 50, she said.

The head of each business channel will be held accountable by profit/loss responsibility, which some lenders think will cause them to tighten their underwriting and scrutinize deals more closely.

But this is not something lenders and borrowers need to worry about, said Lawch. The volume, profitability and fee goals set for each channel are merely management tools and guidelines. “We’ll have better underwriting, not tighter. The business channels will help underwriting be more reasonable, intuitive and practical, rather than adhere to guidelines without context,” he said.

Fannie Mae also created an “investor risk transformation” clearinghouse to sell off the risk that Fannie Mae and DUS lenders take. “It’s no longer clear that a particular entity is the best buyer,” said Lawch. “We’ve got significant investors in our portfolio and need to use them more effectively.”

One unmitigated success introduced last year was Fannie Mae’s “preferred” delegation for DUS lenders to increase their underwriting authority. The lenders were given an initial, undisclosed allocation from which they can give themselves automatic waivers for financing riskier multifamily projects.

So far, the authority has been allowed only for standard DUS loans, said Lawch. He plans to expand this capability to specialized loans, and may make an announcement about that at the Mortgage Bankers Association’s Commercial Real Estate Finance/Multifamily Finance Convention & Expo in February.

AmeriSphere partners with NorthMarq

A new partnership is poised to make AmeriSphere one of the top five Fannie Mae DUS lenders within five years, said Rodrigo Lopez, president and CEO of AmeriSphere Multifamily Finance, LLC.

NorthMarq Capital, Inc., a leading nationwide commercial mortgage banker and Freddie Mac lender, has made a one-time, undisclosed equity investment in AmeriSphere. This exclusive relationship will give NorthMarq access to Fannie Mae financing.

Until now, AmeriSphere operated mostly in Nebraska and Iowa, with some affordable housing in Florida. As a NorthMarq affiliate, AmeriSphere will serve borrowers nationwide.

HarborPoint enters Fannie Mae market

A new player has joined the DUS club: HarborPoint Capital, L.P., a joint venture between Mercantile Mortgage Corp. and partners Hal Kendrick and Donnie Skidmore.

Mercantile had a Fannie Mae license for the past eight years, but it shifted its authority to HarborPoint in the new merger. Kendrick was a partner at Lend Lease Mortgage Capital before its agency lending division was acquired by Wachovia.

HarborPoint will operate nationwide, focusing solely on Fannie Mae lending. For now, it will concentrate on the traditional “bread-and-butter” Fannie Mae product type, conventional loans of $5 million and up.