The federal government\u2019s takeover of Fannie Mae and Freddie Mac is a necessary step to stabilize the U.S. housing market, according to industry experts who are still examining the ramifications of the announcement. The takeover will go a long way toward solving what Stuart Saft, partner in the law firm of Dewey & LeBoeuf called a \u201ccatch 22\u201d that has been bedeviling a critical part of the economy, housing. Real estate, being an illiquid asset, needs a steady stream of capital inflows. The credit freeze-up has meant that home prices have fallen, thus causing lenders to be much more cautious on their home lending, thus starving the sector of capital. The takeover should help the securitization market get back on track, not only in the multi-family sector, but in other commercial real estate sectors as well, Saft told CPN. But, he doesn\u2019t expect that market to quickly reach the securitization levels reached in 2006, for example. Brian Harris, Moody\u2019s senior vice president tells Multi-Housing News (MHN), \u201cThe fact that they can ensure availability of financing is the most significant impact, and a positive one at that, that the takeover will have on multi-family.\u201d In a statement, Dottie Cunningham, CEO of the Commercial Mortgage Securities Association, praised the move. \u201cTreasury and FHFA\u2019s [Federal Housing Finance Agency] collective effort to bolster investor and market confidence in mortgage-backed securities are critical steps toward stabilizing the U.S. housing market,\u201d she said. \u201cIndeed, CMSA and its membership remain hopeful that that Treasury\u2019s plan to purchase MBS from Fannie and Freddie will provide liquidity and promote stability throughout the capital market spectrum.\u201d The takeover presents a \u201cgood news, bad news\u201d dichotomy, Paul Fried (pictured), principal of AFC Realty Capital, told CPN. \u201cMy reaction is \u2018What a disappointment,\u2019\u201d Fried said. \u201cIt\u2019s another bailout of a financial institution. Twenty years after the FDIC and the RTC, we\u2019re back there again.\u201d Fried does see a silver lining, however. \u201cWe may have a bottom benchmark, and the markets may begin to repair themselves,\u201d he said. Fried also said the takeover may dispel some myths about the relative safety of multi-family investments in comparison to other sectors, saying that multi-family investment has always been regarded as a \u201csafe harbor\u201d investment, due in large part to the implicit guarantee that the U.S. government would not let Fannie or Freddie fail. \u201cIt shows that investors were making riskier investments than they should have been making,\u201d he said. Saft said that talk of eventually making the GSEs smaller is a positive. He said he proposed creating a third GSE to the Treasury Department \u201cto take the pressure off Fannie and Freddie.\u201d He said the creation of five or six GSEs would create competition in the marketplace, comparing it to the breakup of AT&T in 1982. Saft said increased government oversight of the GSEs is a given, and Fried seconds that. \u201cA big set of guardrails will be put in place,\u201d he said. Fried does see a silver lining, however. \u201cWe may have a bottom benchmark, and the markets may begin to repair themselves,\u201d Fried said. On a related note, Jerry Howard, CEO of the National Association of Home Builders (NAHB) told MHN, \u201cIn the short-term this is good; the markets, national and international have reacted favorably to this move, interest rates are down and this move seems like it might turn things around for the economy. But in the long-term this could negatively affect multi-family. The portfolio of Fannie Mae and Freddie Mac is expected to shrink with this move and it cannot be predicted where multi-family will land up in the process.\u201d Howard says that there will be changes in the role and make-up of the two companies and in the process some sector could be ignored. \u201cThis could create a vacuum and we don\u2019t know if there is anything else to fill it,\u201d he says. Fried adds that the takeover may dispel some myths about the relative safety of multi-family investments in comparison to other sectors, saying that multi-family investment has always been regarded as a \u201csafe harbor\u201d investment, due in large part to the implicit guarantee that the U.S. government would not let Fannie or Freddie fail. \u201cIt shows that investors were making riskier investments than they should have been making,\u201d he says. Saft says that talk of eventually making the GSEs smaller is a positive. He said he proposed creating a third GSE to the Treasury Department \u201cto take the pressure off Fannie and Freddie.\u201d He said the creation of five or six GSEs would create competition in the marketplace, comparing it to the breakup of AT&T in 1982. He says increased government oversight of the GSEs is a given, and Fried seconds that. \u201cA big set of guardrails will be put in place,\u201d he said.Whatever the case, Howard advises borrowers to get back into the market now. \u201cThe interest rates are down so its time. Spreads have come down already and they will come down more, eventually settling at the rate at which prior to the crisis,\u201d he says.\u201cIn the short-term this is good; the markets, national and international have reacted favorably to this move, interest rates are down and this move seems like it might turn things around for the economy. But in the long-term this could negatively affect multifamily. The portfolio of Fannie Mae and Freddie Mac is expected to shrink with this move and it cannot be predicted where multi-family will land up in the process.\u201d Howard says that there will be changes in the role and make-up of the two companies and in the process some sector could be ignored. \u201cThis could create a vacuum and we don\u2019t know if there is anything else to fill it,\u201d he says.<\/p>\n","protected":false},"excerpt":{"rendered":"
The federal government\u2019s takeover of Fannie Mae and Freddie Mac is a necessary step to stabilize the U.S. housing market, according to industry experts who are still examining the ramifications of the announcement. The takeover will go a long way toward solving what Stuart Saft, partner in the law firm of Dewey & LeBoeuf called…<\/p>\n","protected":false},"author":1314,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[21825],"tags":[],"class_list":["post-1003847007","post","type-post","status-publish","format-standard","hentry","category-finance"],"acf":[],"yoast_head":"\n