GSE Reform Would Impact Multifamily CMBS Markets

Forbes writes that the commercial real estate market could be impacted by an overhaul of Fannie Mae and Freddie Mac. Citing a recent report, the article notes that CMBS loans for multifamily properties have increasingly been going to Fannie and Freddie in the years since the financial crisis. Of all multifamily loans that were originally financed as CMBS before the crisis, 61 percent were later refinanced as Fannie or Freddie Agency loans, 31 percent of refinances went to balance sheet financing, and only 8 percent were refinanced as CMBS. As the GSEs are in conservatorship, the taxpayers ultimately back such loans. While the Federal Housing Finance Agency has announced in its 2018 Scorecard plans to have the GSEs sell off a portion of that multifamily risk via CRT, such transactions have not yet materialized to the same degree as single family CRT.

SFIG supports comprehensive GSE reform that restores the average historical share of lending between agency, balance sheet, and private funding in both the single family and multifamily space. Comprehensive reform should shrink the government footprint so as not to crowd out private capital, and should leverage the use of CRT as a means of offloading credit risk to place private investors in front of taxpayers. SFIG advocates for legislative reform efforts that uses transparency to achieve market-based pricing and levels the playing field between public funding and private capital.

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