Fannie and Freddie now dominate multifamily CMBS
Fannie Mae and Freddie Mac provide a the largest portion of mortgage financing for residential properties in the United States. And, according to a report from Standard & Poor's, the government-sponsored enterprises now also dominate issuance of commercial mortgage-backed securities. "Between 1995 and 2007, GSEs contributed anywhere from just under 3% to just over 11% of the total new issue CMBS market," according to S&P research analyst James Manzi. "That figure increased to more than 23% in 2008 and then ramped up to more than 76% in 2009." The largest jump is in financing of multifamily housing. Fannie Mae alone is clocking huge numbers in the space. In the first half of 2011, Fannie made $40 billion in financing available, which lead to the creation of more than 775,000 affordable, rental units. Indeed, the growing demand for rental properties puts many lenders in a position to grow their multifamily portfolios. Walker & Dunlop Real Estate Financing is one such company enjoying its status as a preferred business partner with Fannie and Freddie, for example. But, as with all markets within mortgage finance, the times are constantly changing. During the boom years, CMBS financing in the multifamily space became dominated by conduit/fusion deals. While this financing structure remains popular among the next generation of CMBS deals, when looking at multifamily loans by balance, only 15% of multifamily loans are now financed this way. However, underwriting criteria is growing more strict at Freddie Mac, S&P reports. "Freddie Mac pools appear to be more conservatively underwritten in 2011, on a weighted average basis, than in 2010," according to Manzi. "Comparatively, the metrics for the other issuers all went modestly in the opposite direction." Write to Jacob Gaffney. Follow him on Twitter @jacobgaffney.