The U.S. Government Accountability Office (GAO) recently released a report entitled “Mortgage Financing: Fannie Mae and Freddie Mac’s Multifamily Housing Activities Have Increased,” which examines the role that Fannie Mae and Freddie Mac have played in providing financing for multifamily properties with five or more units. The report finds that between 1994 and 2011, the multifamily loan activities of Fannie Mae and Freddie Mac have generally increased. In this period, Fannie Mae held a lower percentage of multifamily loans in its portfolio than Freddie Mac and while the multifamily business operations were generally profitable, both Fannie and Freddie reported losses in 2008.

In recent years, Fannie and Freddie have been more active in the multifamily marketplace. Before 2008, the organizations financed about 30 percent of multifamily loans. However, Fannie and Freddie’s loan volume increased to 86 percent in 2009, but has since decreased to 57 percent as other participants have reentered the market. In addition, the Federal Housing Finance Agency (FHFA) has identified deficiencies in Fannie and Freddie’s credit risk management, including problems with Fannie’s delegated underwriting and servicing program, risk-management practices, and information systems; and Freddie’s management of its lower-performing assets. However, both enterprises have been taking steps to address these deficiencies.

Most importantly, GAO’s analysis concluded that Fannie and Freddie’s multifamily activities greatly contributed to the organization’s ability to meet affordable housing goals.

Click here to read the GAO report.