Fannie Mae has officially recorded another active stretch of multifamily lending in 2006. Speaking earlier this week at the 17th annual Mortgage Bankers Association/Commercial Real Estate Finance (CREF) conference in San Diego, company executives announced that it invested $34.3 billion in multifamily housing in 2006—and that now stands as a record annual volume for the firm. By comparison, Fannie Mae invested $25.6 billion into the rental housing market in 2005.
The Washington, D.C.-based financial services firm—which trades under the ticker FNM on the New York Stock Exchange—offers banks and other mortgage lenders financing, credit guarantees and other services aimed at allowing lenders to underwrite more consumer loans. The company also finances affordable housing and community development projects through instruments such as Low Income Housing Tax Credits (LIHTC).
Efforts by Fannie Mae and others to promote affordable rental housing come as many of the largest affordable rental complexes in the nation are being sold for colossal sums. Last year, for example, Manhattan’s sprawling Peter Stuyvesant Town/Peter Cooper Village complex sold for more than $5.4 billion to closely held investment manager Tishman Speyer. Tenants are already protesting the new landlord’s efforts to raise rents and move blocks of units out of the rent-stabilized pool. Other large housing complexes that were developed as affordable redoubts are expected to follow a similar path given the torrent of capital that is flowing into the multifamily market.
According to Manhattan-based Real Capital Analytics, roughly $88 billion of significant apartment properties (above $5 million) sold in 2006. That may have been down 2.5% from the 2005 total, but it still proves that investor demand for apartment remains extremely strong.
Unlike housing lenders that can do business with a range of players, Fannie Mae exclusively invests in the affordable housing market. Roughly 90% of the multifamily units financed by Fannie Mae in 2006 are affordable to families at or below the median income level in their communities. And 58% of all multifamily units financed by Fannie Mae served special affordable families (low- and very-low income families in low-income areas) in underserved markets.
“Thanks to the DUS lenders and the Fannie Mae team, we had a great year in 2006,” says Phil Weber, who was appointed senior vice president of Fannie Mae’s Multifamily division last summer. DUS—which stands for Delegated Underwriting and Servicing—refers to a group of 26 lenders authorized by Fannie Mae to underwrite, close and deliver most loans without Fannie Mae oversight. Over the past few years, the DUS product has become an incredibly popular way to financing apartments on a long term basis. In 2006, for example, DUS lenders accounted for $20.4 billion of Fannie Mae’s total multifamily housing investment.
Adds Weber: “The year ahead will be exciting as we work with the DUS lenders to add value by developing innovative products and offering flexible financing solutions to the marketplace.”
Some other news that was unveiled in San Diego: Fannie Mae invested $2.2 billion in seniors housing last year, a 29% increase over 2005. Fannie Mae’s Seniors Housing product offers flexible loan terms for properties that provide independent living, assisted living, and assisted living with Alzheimer's care. Fannie Mae also committed $2 billion in equity investments that qualify for LIHTC.
“Thanks to the syndicators and other housing partners, Fannie Mae maintained its position as the largest investor in LIHTCs in 2006,” says Richard Lawch, senior vice president of Fannie Mae’s Community Investments division. “Fannie Mae is working hard to be the capital provider of choice for equity and mezzanine investments that finance affordable single-family and multifamily properties.”