MBA Makes Recommendations of GSEs’ Future in Multifamily Market

With much focus in the industry on the single-family mortgage market and the challenges it currently faces, the ""Mortgage Bankers Association (MBA)"":http://www.mbaa.org/default.htm created a task force to address policy concerns in the multifamily market. With more than one in seven households residing in multifamily rental housing, the MBA task force says ""ensuring a vibrant and stable multifamily finance system is equally important to the public dialogue.""

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As such, the task force released a white paper Tuesday discussing the future of the multifamily market and the future of the GSEs in that market.

""We recognize the critical countercyclical role the GSEs have played in providing liquidity when private capital sources largely scaled back,"" said Brian Stoffers, chairman of the MBA's GSE Multifamily Task Force.

""Policies enacted going forward should reflect that necessary government role but also encourage private capital to enter and remain in the market as the primary source of financing for multifamily housing,"" Stoffers said.

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The MBA task force outlined a five-point plan for the GSEs.

First, the MBA stresses the importance of recognizing the range of capital sources supporting the multifamily market. ""The roles of the GSEs and FHA in financing multifamily mortgages have been substantial, but other market participants â€" including life insurance companies, banks and other lenders â€" have maintained a strong presence as well,"" states the MBA white paper.

Second, while suggesting a limited government-backed insurance program to protect market liquidity, the MBA says ""private capital should be the primary source of financing for multifamily housing.""

The limited government insurance program would be modeled after FDIC programs and would ""support such mortgage-backed securities, not at the level of the issuer, as is the case today."" Similar models are already in place for the FDIC banking system and federal pension insurance for private benefit plans.

Third, the white paper says the multifamily market should be regulated to ensure companies issuing government-backed securities are funded by private capital and focus primarily on securitization.

Fourth, the resources and talent currently harbored at the GSEs should be repurposed to support the new multifamily housing finance market, not lost in the transition.

Fifth, the decision as to whether the GSEs' multifamily businesses should function as standalone businesses separate from their single-family businesses should be based on ""the long-term liquidity and stability of the multifamily finance system in all market cycles, rather than whether existing multifamily business lines could survive as ongoing business.""