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Lending / The Ticker

FHFA seeks input on GSE reform

Public given opportunity to voice concerns

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Reform talks regarding what should happen to Fannie Mae and Freddie Mac are starting to branch out past the federal government.

 

The Federal Housing Finance Agency is seeking public input on strategies for reducing Fannie Mae and Freddie Mac’s presence in the multifamily housing finance market in 2014.

In conjunction with the goal of contracting the market presence of the GSEs, the FHFA 2013 Conservatorship Scorecard recommends reducing the GSEs' volume of new multifamily business by 10% relative to 2012.  

The FHFA’s goal is to reduce the enterprises’ risk exposure and allow for more private capital in the mortgage market, so it is seeking the public’s opinion on the potential market impact of various strategies.

Specifically, the agency is looking at various loan terms and whether it should consider loan terms as a way to reduce enterprises.

In 2012, of Fannie Mae’s total multifamily loan production, 71% classified as 10-year term loans and at Freddie Mac, 57% of total loan production was made up of 10-year term loans.

“Given the low utilization rate of the short term financing options, it appears that the benefit of the enterprises’ secondary market activity is to offer borrowers access to longer term permanent financing,” the FHFA said.

Additionally, the FHFA is debating if the enterprises should continue to offer a variety of products, including full or partial term interest only loans and various types of adjustable or fixed rate loans.

“The enterprises currently provide financing for a broad range of multifamily properties that serve households of varying income levels,” the agency said.

As a result, the FHFA is debating putting limits on properly financing, citing imposing limits on maximum amounts of financings and re-imposing multifamily loan limits as a possible solution.

Meanwhile, another option would be to put limits on business activities, such as reducing the scope of the business activities engaged in by the enterprises.

As a whole, there are several options that the FHFA could consider and the agency is requesting that all interested parties provide input. All input must be received in writing within 60 days. 

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