Presenting the findings of their recent white paper titled, "Moving toward a Viable Multifamily Debt Market with No Ongoing Federal Guarantee," Thomas White of the Seachange Consulting Group and Charlie Wilkins of the Compass Group outlined a five-year plan for ending the federal guarantee in multifamily housing. Both authors stressed the vulnerability of the current system to political manipulation and interest-rate shifts. This view was reiterated by keynote speaker Rep. Randy Neugebauer, who also highlighted the cost of the Federal guarantee.
While discussants collectively expressed the need for multifamily housing reform, they disagreed on the role the guarantee should play in the market. Peter Donovan of CBRE argued that government involvement has created market discipline, which resulted in low default rates relative to single-family and commercial mortgages. Thomas Kim of the Mortgage Bankers Association suggested that private capital was already present in the market through investment in government-sponsored-enterprise securities and direct lending. Jim Lockhart of WL Ross & Co. concluded that the government share of multifamily housing mortgages needs to be scaled back, but should continue to play a countercyclical role.
Commercial real-estate asset classes such as office and industrial buildings, shopping centers, and hotels have no federal guarantee. Yet, since the early 2000s, Fannie Mae and Freddie Mac (with their formerly implicit and now explicit federal guarantee) have dominated multifamily lending, which used to be dominated by private lenders. Moreover, during that same period, there was an explosion of multifamily debt, which indicated that the multifamily sector may have been overleveraged. At this event, industry experts Tom White and Charlie Wilkins will argue that the federal guarantee should be phased out and will present findings from their interviews with a host of multifamily and capital-markets experts.
If you are unable to attend, we welcome you to watch the event live on this page. Full video will be posted within 24 hours.