SAN DIEGO, CA -- Fannie Mae (FNM/NYSE) today announced that the company, through its lender and housing partners, financed $35.5 billion in multifamily rental housing in 2008. Fannie Mae's multifamily financing solutions include debt financing through lender partners and bond purchases.

"Fannie Mae and its DUS^® lenders were pleased to provide significant liquidity and stability to the multifamily industry despite record levels of uncertainty and volatility experienced by the markets in 2008," said Phil Weber, SVP of Multifamily at Fannie Mae.

Fannie Mae's DUS lenders and affiliates delivered $33.3 billion of the company's total investment in multifamily housing, including $21.8 billion in total DUS product. DUS lenders are able to underwrite, close and deliver most loans without pre-review by Fannie Mae, which results in a highly efficient execution.

Approximately 89 percent of the multifamily units financed by Fannie Mae in 2008 were affordable to families at or below the median income of their communities. Approximately 54 percent of all multifamily units financed by Fannie Mae served special affordable families (low- and very-low income families in low-income areas), and nearly 58 percent of the multifamily units financed were made in underserved markets.

Demand for Fannie Mae's Early Rate Lock (ERL) products in 2008 was strong as borrowers sought interest rate certainty in an uncertain market. The dollar volume of loans using an ERL product rose from $4.6 billion in 2007 to $10 billion in 2008, a 116 percent increase.

In 2009, market fundamentals are expected to present challenges for the multifamily market. Household formations are expected to fall below 1 million in 2008, from a high of nearly 2 million in 2005, according to U.S. Census data. Without positive job growth spurring new household formations, apartment owners are facing rising vacancies, further increases in concessions for tenants, and less operating income.

"In the near term, fundamentals of the multifamily market will come under pressure, and Fannie Mae is taking steps to mitigate risks associated with weak rental demand," said David Worley, SVP of Risk Management for Housing & Community Development at Fannie Mae. "We are committed to maintaining strong credit standards with a greater focus on loans with higher debt service coverage and lower loan-to-value ratios. We have also boosted our asset management team."

A top priority for Fannie Mae Multifamily in 2009 will be to reinvigorate its MBS/DUS business and broaden the investor base. By ramping up its MBS/DUS execution, Fannie Mae Multifamily expects to shift from being primarily a multifamily portfolio lender to a lender that provides liquidity to the multifamily market mainly through MBS issuance. The company has begun reaching out to DUS lenders and broker dealers to increase interest in this execution.