The U.S. Treasury Department on Dec. 24 issued an important announcement confirming its unlimited support for Fannie Mae and Freddie Mac through 2012 and easing the portfolio limits on the mortgage giants. Before the announcement, the retained portfolio of each firm was capped at $800 billion and each was required to reduce their portfolios by 10 percent per year beginning in 2010. Now, the portfolio reduction requirement applies to the portfolio caps ($900 billion) and not the actual size of the portfolio at the end of 2009 ($771.5 billion for Fannie Mae and $761.8 billion for Freddie Mac).
This means the companies will not have to take immediate steps to reduce their portfolios and could even expand them. Additionally, the Treasury announced that it was committed to providing the Government Sponsored Enterprises (GSEs) with unlimited financial support through 2012, removing a prior limit of $200 billion per company.
The announcement makes it clear that the federal government intends to back the GSEs in whatever capacity is necessary to maintain their housing finance activities. This should provide added certainty to the multifamily housing market that the GSEs will continue to be able to provide capital to the sector.
NAA/NMHC’s GSE Task Force met in early January to continue its work to develop a policy framework for GSE reform that specifically includes the needs of the apartment sector. At the request of the Treasury Department, following the Dec. 15 meeting with Treasury Secretary Timothy Geithner, NAA/NMHC submitted a brief statement outlining the impact of GSE reform on multifamily mortgage liquidity.
While GSE reform legislation is not likely until 2011 or 2012, work will begin in 2010. The House Financial Services Committee is likely to hold its first hearing on the topic in March and the Obama Administration is expected to release its guiding principles in February as part of its FY 2011 budget proposal.
NAA/NMHC are working closely with the stakeholders to ensure that they understand the multifamily perspective and the important differences between the GSEs’ single-family business and their multifamily business.