FM Commentary

Fannie Mae and Its Lenders Meet the Increased Demand for Workforce Rental Housing

As demand grows for affordable multifamily rental housing, Fannie Mae and our lender customers continue to ensure that financing is available for multifamily mortgages. In 2011, Fannie Mae provided more than $24 billion in debt financing for 423,000 multifamily units.

With our public mission to provide a stable source of liquidity for quality, affordable housing, Fannie Mae has targeted the middle of the rental market. Almost 90 percent of the units we financed last year were affordable to low- and middle-income families.

Fannie Mae is the single largest source of mortgage financing for rental housing and has been a major player in the multifamily market for more than 25 years. We provide financing by purchasing or securitizing multifamily loans made by our lender customers. As of September 2011, the multifamily book of business totaled $193 billion, which is 21 percent of the total outstanding debt in the multifamily market.

We credit our multifamily business success to a strategy that shares risk with our lenders. Lenders using Fannie Mae’s unique Delegated Underwriting and Servicing (DUS®) platform are pre-approved with the authority to underwrite, close, and service loans on our behalf. This provides lenders with faster response time, greater efficiency, and other advantages.

In return for this delegated authority, DUS lenders share the risk of loss throughout the life of the loan. Originators, servicers, and Fannie Mae have “skin in the game,” ensuring that each party is engaged in the success of that loan. We believe this approach has been a success, as the delinquency rate on multifamily loans originated by DUS lenders is below the industry average.

Lenders find that DUS offers proven success. Each of our top 11 DUS producers provided at least $1 billion in loan deliveries to Fannie Mae in 2011. Overall DUS production included a variety of special asset categories, including financing for:

• Rent-restricted and state or federally subsidized multifamily affordable housing. The $2.3 billion in volume represented a 282 percent increase over 2010.
• Large loans of $25 million or more. The $6.9 billion in large loan volume was nearly 50 percent greater than 2010.
• Structured transactions totaling $2 billion, a 144 percent increase over 2010.
• Small loans of up to $3 million (or $5 million in high-cost areas) totaling $2.4 billion, about the same as 2010.
• Seniors housing totaling $1.4 billion, more than 120 percent greater than 2010.
• Manufactured housing communities totaling $535 million, essentially the same as in 2010.

Read more about DUS lenders and the 2011 results here. We congratulate all of our DUS lenders on an excellent year and on their dedicated service to the multifamily market.

Manuel Menendez
Vice President
Multifamily Customer Engagement

February 10, 2012

The views expressed in these articles reflect the personal views of the authors, and do not necessarily reflect the views or policies of any other person, including Fannie Mae or its Conservator. Any figures or estimates included in an article are solely the responsibility of the author.