We need to pay attention to multifamily housing as an essential piece of the mortgage finance puzzle, as our latest paper points out. Congress will likely not act until next year at the earliest to map out the future mortgage finance, particularly Fannie Mae and Freddie Mac. In the meantime, the Federal Housing Finance Agency (FHFA), which oversees Fannie and Freddie, can take steps to stabilize multifamily mortgage finance and prepare for the transition to come. Those measures should:
- Protect taxpayers by making sure guarantees are fully paid for, recognizing that the federal guarantee of Fannie Mae and Freddie Mac has become effectively explicit
- Prevent market disruption by maintaining mortgage capital delivery channels
- Strike the right balance of public and private capital risk by strengthening proven mechanisms for private entities to bear risk ahead of government
- Create and preserve affordable multifamily housing even as the market readjusts
- Encourage private capital to bear more of the risk in multifamily by:
a. Specifying the portion of the MBS guarantee fee that pays for the government wrap.
b. Structuring multifamily MBS to have at least 20% of risk borne by private capital with benchmarks for comparison of different models.
3. Limiting GSE total portfolio size in multifamily to encourage securitization.
4. Requiring that more than 50% of the apartments financed in any given year be affordable to residents at 80% of AMI or below
- Improve transparency with quarterly division-level reporting for the multifamily business units.
- Pilot new approaches in multifamily to reach underserved segments in a cost-controlled, carefully monitored way.