GSEs Bolster Multifamily Portfolios

The GSEs have increased their presence in the multifamily loan sector over the past several years, relying on these loans to meet affordable housing goals, according to a recent ""study"":http://www.gao.gov/assets/650/647800.pdf by the Government Accountability Office (GOA).

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From 1994 through 2011, both GSEs generally increased the amount of multifamily loans they held. Fannie Mae generally held a lower percentage of multifamily loans than Freddie Mac.

However, the trend changes slightly around 2008. Prior to 2008, Fannie Mae and Freddie Mac together financed approximately 30 percent of the multifamily market.

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In 2009, the enterprises were backing 86 percent of multifamily loans.

This spike reversed somewhat, and by 2011, the GSEs were financing a 57 percent of the market. GOA says this decline occurred ""as other participants reentered the market.""

GOA also noted that in 2008 and 2009, simultaneously with the spike in the enterprises' multifamily loan presence, both GSEs reported losses, where they had generally seen profits before.

While the GSEs' multifamily loans ""performed as well or better than those of other market participants,"" the GSEs' regulator, the Federal Housing Finance Agency (FHFA) sees room for improvement in their credit risk management, according to GOA.

The multifamily market has helped both GSEs meet their affordable housing goals required by their regulator.

In 2008, multifamily loans made up about 4.5 percent of the GSEs' portfolios combined. About one-third of those loans went to low- and moderate-income housing.

Still, the serious delinquency rate for multifamily loans financed by Fannie and Freddie from 1994 to 2011 was less than 1 percent.