Fannie, Freddie and Multifamily

We all know that the GSE's have been extremely active (and profitable) in the multifamily debt markets lately despite the broader market fallout and impending bailout.

The question that I ponder daily is: Will Fannie and Freddie continue to be the go to source for multifamily finance as we move towards 2009? And if not, what are the alternatives?

In somewhat interesting industry news today, Fannie Mae pulled out of further investment in the "The Mid-America Multifamily Fund I" which was a three year joint venture with Mid-America Apartment Communities on a goal to raise $500MM for acquisitions. Certainly makes sense given their focus on capital preservation, but it also gets you thinking about the potential collateral damage outside the debt markets.

Here is an excerpt from the Reuters article:

Fannie Mae halts purchases for Mid-America Fund

"While we will be the first to acknowledge that direct real estate investment and real estate lending are two different animals, and expect multifamily lending to continue given the profitability of the business, we believe that a focus on capital conservation at the GSEs will, at a minimum, cause the cost of financing for the multifamily industry to increase over the next 12 months," Bank of America analysts said in a research note.

Since we can't really get on with things until this mess is settled, and it doesn't appear to be working itself out, I am going to ask a few friends to chime in on a couple of basic questions as relates to multifamily:

How will multifamily lending be impacted with a taxpayer bailout of Fannie and Freddie?

What are the short-term and long term ramifications for the borrower?

How are industry fundamentals effected?

What is the target date of the event?

I am going to save myself the research hours and turn it over to the market experts since I do believe that this outcome is going to be much more than I could ever get my arms around. I do like the over-under at Labor Day though.

If you don't feel like posting please feel free to shoot me a note offline.