An indefinite conservatorship could endanger the stability and dependability of the Fannie Mae and Freddie Mac’s multifamily staff, said Christopher Tawa, multifamily housing policy manager at the Federal Housing Finance Agency.
“It’s really noticeable how the multifamily staff at Fannie Mae and Freddie Mac have been very stable,” Tawa said Monday against the troubling backdrop of a lingering conservatorship.
“You’ve had executive leadership changes, but at the staff level there are a lot of folks who have remained because of pride of ownership in the business," he added. "They have personally aligned with it even though they have other professional opportunities that’s for sure and yet that core of professionals is still there.”
However, Tawa, said he’s “very concerned” that an extended conservatorship in which there is no foreseeable resolution will eventually undermine the stability of the GSEs’ multifamily staff, which understands the history and subtlety of multifamily housing. These staffers see themselves as part of a larger housing solution and Tawa hinted that such an ideology may be undermined by stalling on mortgage-finance reform.
“Over time I think that is one of the things that could be very negative,” Tawa said Monday at the Mortgage Bankers Association's commercial/multifamily servicing and technology conference conference in Dallas. “And after all, it’s all about people. We have systems yes, but you get good execution from Fannie and Freddie. You get the predictable response because it’s the same continuity of who has been managing the platform. “
Fannie and Freddie continue to insure the majority of multifamily loans, but their dominance is shrinking. After the financial crisis hit, the GSEs’ market share climbed to about 87% of the multifamily market. It then fell to 67% in 2010 and to 57% in 2011, according to Beekman Advisors.
Tawa said the FHFA has no target number regarding how much of the multifamily market the GSEs should hold. But it is concerned about the sector’s cost of capital.
“We know there’s a direct line between cost of financing and cost of rents at the ground level: The higher the cost of borrowing, the more effect that will have on rents,” Tawa said. “If that correlation is lost and we start to move too dramatically into curtailing governmental support just because we are philosophically opposed to it. We have to keep an eye on the ramifications of moving away from strong government support of multifamily.”
The intense dogma surrounding the ideal share of the single-family market that should be government-backed doesn’t exist within the multifamily sector. The FHFA, Tawa said, “feels strongly” that preparing a proposal for the future state of housing goes beyond the bounds of the agency’s regulatory role.
“We ought to provide the analysis around the alternatives that could be selected within the policy space,” Tawa said. “You will not see FHFA joining in the future state policy formation nor will there be a joint proposal from the Department of Housing and Urban Development and FHFA.”