Thursday, November 19, 2009

Increased Apartment Loan Losses at Fannie Mae and Freddie Mac

The Wall Street Journal reports that the delinquency rate for Fannie Mae's apartment loan portfolio is on the rise.  Delinquencies increased from 0.16% in Sept. 2008 to 0.62% in September 2009.

Fannie and Freddie increased their apartment lending from 34% of the market in 2006 to 84% in 2008. About one fourth of all loans on Fannie's books were made at the top of the market in 2007. Even though losses from Fannie and Freddie's $300 billion apartment loans pale in comparison to their losses on loans for single-family residences, some critics of the agencies say the firms were too aggressive with their apartment lending.  The firms generally deny this charge, citing the fact that 97% of Freddie-backed properties are still worth more than the value of underlying loans.

Various proposals to revamp Freddie and Fannie haven't paid much attention to multifamily lending.  Industry leaders aren't worried, saying it's highly unlikely the government would take any position that would negatively impact affordable housing.

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