MORTGAGE 

FINANCING

Fannie Mae and 

Freddie Mac’s 

Multifamily Housing 

Activities Have 

Increased

Report to the Chairman, Committee on 

Financial Services, House of 

Representatives

September 2012

GAO-12-849

United States Government Accountability Office

GAO
United States Government Accountability Office

Highlights of GAO-12-849, a report to the 

Chairman, Committee on Financial Services, 

House of Representatives

September 2012

MORTGAGE FINANCING

Fannie Mae and Freddie Mac’s Multifamily Housing 

Activities Have Increased

Why GAO Did This Study

Congress established the enterprises 

to provide stability in the secondary 

market for residential mortgages and 

serve the mortgage credit needs of 

targeted groups. But in September 

2008, FHFA placed the enterprises in 

conservatorship out of concern that 

their deteriorating financial condition 

would destabilize the financial system. 

As Congress and the Executive Branch 

have explored options for restructuring 

the enterprises, most of the discussion 

has focused on the single-family 

market. But the enterprises also play a 

large role in providing financing for 

multifamily properties (those with five 

or more units).

GAO was asked to describe (1) how 

the enterprises’ multifamily loan 

activities have changed, (2) the 

enterprises’ role in the multifamily 

financing marketplace and how they 

met affordable housing goals, and 

(3) how the enterprises’ multifamily 

delinquency rates compare with those 

of other mortgage capital sources and 

how they have managed their credit 

risk. 

To address these objectives, GAO 

analyzed (1) loan-level data from 1994 

(the earliest period for which loan-level 

data were available) through 2011 from 

the enterprises and (2) data from the 

Mortgage Bankers Association; 

interviewed key multifamily housing 

stakeholders; and reviewed FHFA 

examination reports. 

FHFA, Fannie Mae, and Freddie Mac 

provided technical comments, which 

GAO incorporated where appropriate.

What GAO Found

From 1994 through 2011, the multifamily loan activities of Fannie Mae and 

Freddie Mac (the enterprises) generally increased. In this period, Fannie Mae 

held a lower percentage of multifamily loans in its portfolio than Freddie Mac. 

While the enterprises’ multifamily business operations generally were profitable, 

both enterprises reported losses in 2008 and 2009.

In recent years, Fannie Mae and Freddie Mac played a larger role in the 

multifamily marketplace, and their multifamily activities contributed considerably 

to meeting their affordable housing goals (set by their regulator for the purchase 

of mortgages that serve targeted groups or areas). Before 2008, the enterprises

financed about 30 percent of multifamily loans (see figure). Their share increased 

to 86 percent in 2009, but decreased to 57 percent in 2011 as other participants 

reentered the market. GAO’s analysis showed that multifamily activities greatly 

contributed to the enterprises’ ability to meet affordable housing goals. For 

example, the enterprises’ multifamily activities constituted 4.5 percent of their 

total business in 2008, but about a third of the units used to meet the goal of 

serving low- and moderate-income persons were multifamily units.

Financing of Multifamily Loans Originated, 2005-2011

Note: Percentages may not add to 100 because of rounding. 

The enterprises have purchased multifamily loans that generally performed as 

well as or better than those of other market participants, but the Federal Housing 

Finance Agency (FHFA) has identified deficiencies in their credit risk 

management. In 2005-2008, the enterprises’ serious delinquency rates (less than 

1 percent) were somewhat lower than the rates on multifamily loans made by 

commercial banks and much lower than rates for multifamily loans funded by

commercial mortgage-backed securities. FHFA, through its examination and 

oversight of the enterprises, identified a number of credit risk deficiencies over 

the past few years. For example, FHFA found deficiencies in Fannie Mae’s 

delegated underwriting and servicing program, risk-management practices, and 

information systems; and Freddie Mac’s management of its lower-performing 

assets. Both enterprises have been taking steps to address these deficiencies. View GAO-12-849. For more information, 

contact William B. Shear at (202) 512-8678 or 

shearw@gao.gov.
Page i GAO-12-849 Multifamily Housing Financing

Letter 1 

Background 5

The Enterprises’ Multifamily Loan Activities Generally Increased 

and Delinquencies Remained Low 9

Enterprises Increased Their Multifamily Market Share and 

Generally Met Affordable Housing Goals 36

Enterprises’ Purchased Multifamily Loans Have Performed 

Relatively Well, but Regulators Identified Issues with Credit Risk 

Management 54

Agency Comments and Our Evaluation 66

Appendix I Objectives, Scope, and Methodology 68

Appendix II Fannie Mae and Freddie Mac’s Multifamily Loan Purchases in the 25 

Largest Metropolitan Areas 78

Appendix III Additional Data on Fannie Mae and Freddie Mac’s Multifamily 

Activities 83

Appendix IV Enterprises’ Multifamily Loan and Property Sizes Compared with Other 

Market Participants 90

Appendix V Data from Selected Housing Finance Agencies and Loan Consortiums 93

Appendix VI GAO Contact and Staff Acknowledgments 96

Tables

Table 1: Unpaid Principal Balance of Multifamily Loans That 

Freddie Mac Held for Investment and Held for Sale, 2008-

2011 13

Contents
Page ii GAO-12-849 Multifamily Housing Financing

Table 2: Principal Balance of Multifamily Loans Purchased by the 

Enterprises and Multifamily Loans Originated by Life 

Insurance Companies and CMBS Lenders, 2005-2011 40

Table 3: Enterprises’ Goal Targets and Performance, 2001-2009 51

Table 4: Enterprises’ Target and Performance for Special 

Affordable Multifamily Subgoal, 2001-2009 52

Table 5: Multifamily Contributions to Enterprises’ Affordable 

Housing Goals, 2001-2009 53

Table 6: Enterprises’ Multifamily Goal Targets and Performance, 

2010-2011 54

Table 7: Median Debt-Service Coverage and LTV Ratios for 

Multifamily Loans Financed by the Enterprises, CMBS 

Lenders, and Life Insurance Companies, 2005-2011 56

Table 8: Percentage of Enterprise, CMBS, and FHA Multifamily 

Loans Financed in 2005-2010 That Were Seriously 

Delinquent as of December 31, 2011 58

Table 9: Percentage of Outstanding Unpaid Principal Balances of 

Multifamily Loans That Were Seriously Delinquent for the 

Enterprises and FDIC Banks, Year End 2005-2011 59

Table 10: Percentage of Outstanding Unpaid Principal Balances of 

Multifamily Loans That Were Seriously Delinquent for the 

Enterprises and Life Insurance Companies, Year End 2005-

2011 60

Table 11: Enterprises’ Multifamily Risk-Sharing Loans with FHA, 

1995-2011 62

Table 12: Fannie Mae’s Multifamily Loan Purchases in the 25 

Largest Metropolitan Areas, 1994-2011 (Numbers in 

thousands) 78

Table 13: Freddie Mac’s Multifamily Loan Purchases in the 25 

Largest Metropolitan Areas, 1994-2011 (Numbers in 

thousands) 80

Table 14: Fannie Mae and Freddie Mac Multifamily Loan 

Acquisitions by State, 1994-2011 83

Table 15: Fannie Mae and Freddie Mac’s Serious Delinquency Rates 

for Multifamily Loans with Debt-Service Coverage Ratios 

Less Than 1.25 85

Table 16: Fannie Mae and Freddie Mac’s Serious Delinquency Rates 

for Multifamily Loans with Debt-Service Coverage Ratios 

Greater Than or Equal to 1.25 86

Table 17: Fannie Mae and Freddie Mac’s Serious Delinquency Rates 

for Multifamily Loans with LTV Ratios Less Than or Equal 

to 80 Percent 87
Page iii GAO-12-849 Multifamily Housing Financing

Table 18: Fannie Mae and Freddie Mac’s Serious Delinquency Rates 

for Multifamily Loans with LTV Ratios Greater Than 80 

Percent 88

Table 19: Fannie Mae and Freddie Mac’s Multifamily 

Administrative Costs, 2002-2011 89

Table 20: Median Loan Size and Number of Units for Multifamily 

Loans Financed by the Enterprises, Life Insurance 

Companies, and CMBS Lenders, 2005-2011 90

Table 21: Median Loan Size and Number of Units for Loans 

Originated by Selected Housing Finance Agencies, 2005-

2011 91

Table 22: Median Loan Size and Number of Units for Loans 

Originated by Selected Loan Consortiums, 2005-2011 92

Table 23: Median Debt-Service Coverage and LTV Ratios for Loans 

Financed by Selected Housing Finance Agencies, 2005-

2011 93

Table 24: Median Debt-Service Coverage Ratios and LTV Ratios for 

Loans Financed by Selected Loan Consortiums, 2005-2011 94

Table 25: Percentage of Selected Housing Finance Agencies’ 

Unpaid Principal Balances That Were Seriously Delinquent 

as of December 2011, 2005-2011 95

Table 26: Percentage of Loans Seriously Delinquent for Selected 

Loan Consortiums, 2005-2011 95

Figures

Figure 1: Enterprises’ Annual Multifamily Loan Purchases by 

Number of Loans and Unpaid Principal Balance, 1994-

2011 10

Figure 2: Enterprises’ Annual Volume of Retained Multifamily 

Loans, Securitized Multifamily Loans, and Multifamily 

Bond Credit Enhancements, 1994-2011 12

Figure 3: Enterprises’ Multifamily Loan Purchases by Unit Size of 

Properties, 1994-2011 15

Figure 4: Enterprises’ Annual Multifamily Loan Purchases by Loan 

Size at Acquisition, 1994-2011 17

Figure 5: Fannie Mae’s Annual Purchases of Multifamily Loans in 

25 Largest Metropolitan Areas, 1994-2011 19

Figure 6: Freddie Mac’s Annual Purchases of Multifamily Loans in 

25 Largest Metropolitan Areas, 1994-2011 21

Figure 7: Fannie Mae and Freddie Mac Multifamily Loan Terms, 

1994-2011 23
Page iv GAO-12-849 Multifamily Housing Financing

Figure 8: Enterprises’ Multifamily Loan Purchases by Asset Class, 

1994-2011 25

Figure 9: Enterprises’ Annual Multifamily Loan Purchases by 

Interest Rate Type, 1994-2011 26

Figure 10: Fannie Mae’s Use of Various Multifamily Structuring

Options 28

Figure 11: Fannie Mae’s Annual Multifamily Loan Purchases by 

Type of Underwriting, 1994-2011 29

Figure 12: Unpaid Principal Balances of Enterprises’ Seriously 

Delinquent Multifamily Loans and Multifamily Portfolio 

Serious Delinquency Rates, 1994-2011 31

Figure 13: Unpaid Principal Balances of Enterprises’ Multifamily 

REO Property and Multifamily REO Property as a 

Percentage of Multifamily Book of Business, 1995-2011 32

Figure 14: Net Income Attributable to Fannie Mae and Freddie 

Mac’s Multifamily Business, 2002-2011 34

Figure 15: Net Charge-offs Attributable to Fannie Mae and Freddie 

Mac’s Multifamily Business, 2002-2011 35

Figure 16: Multifamily Guarantee Fees Received by Fannie Mae and 

Freddie Mac, 2002-2011 36

Figure 17: Multifamily Mortgage Debt Outstanding, 2005-2011 38

Figure 18: Financing of Multifamily Loans Originated, 2005-2011 39

Figure 19: Distribution of Rental Units by Building Size (Number of 

Units), 2010 43

Figure 20: Enterprises’ Affordable Housing Goals Timeline, 1992-

2012 48

Abbreviations

 

ACLI American Council of Life Insurers 

activity report Annual Housing Activity Report

AMI area median income 

ARM adjustable-rate mortgage

CMBS commercial mortgage-backed security 

CREFC Commercial Real Estate Finance Council 

DUS® Delegated Underwriting and Servicing 

enterprise government-sponsored enterprise 

Federal Reserve Board of Governors of the Federal Reserve 

System 

FDIC Federal Deposit Insurance Corporation
Page v GAO-12-849 Multifamily Housing Financing

FHA Federal Housing Administration 

FHFA Federal Housing Finance Agency 

HERA Housing and Economic Recovery Act of 

2008

HFA housing finance agency 

HUD Department of Housing and Urban 

Development 

LIHTC low-income housing tax credit 

LTV loan-to-value 

MBA Mortgage Bankers Association 

MBS mortgage-backed security 

MSA metropolitan statistical area 

NAAHL National Association of Affordable Housing 

Lenders 

NCSHA National Council of State Housing Agencies 

NIBP New Issue Bond Program 

OFHEO Office of Federal Housing Enterprise 

Oversight

REO real estate-owned 

RHS Rural Housing Service 

Safety and Soundness Act Federal Housing Enterprises Financial 

Safety and Soundness Act of 1992

TCLF Temporary Credit and Liquidity Facilities

Treasury Department of the Treasury

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Page 1 GAO-12-849 Multifamily Housing Financing

United States Government Accountability Office

Washington, DC 20548

September 6, 2012

The Honorable Spencer Bachus

Chairman

Committee on Financial Services

House of Representatives

Dear Chairman Bachus:

On September 6, 2008, the Federal Housing Finance Agency (FHFA) 

placed Fannie Mae and Freddie Mac into conservatorship out of concern 

that the deteriorating financial condition of the two government-sponsored 

enterprises (the enterprises) threatened the stability of financial markets.1

Congress established Fannie Mae and Freddie Mac in 1968 and 1989, 

respectively, as for-profit, shareholder-owned corporations.

While the conservatorships can remain in place indefinitely as efforts are 

undertaken to stabilize the enterprises and restore confidence in financial 

markets, FHFA has said that the conservatorships were not intended to 

be permanent. Most of the discussion about the future of the enterprises 

has focused on their role in supporting financing for single-family homes, 

but they have played a larger role in providing financing for multifamily 

properties (those with five or more units) since the financial crisis of 2007. 

2

 

1

The Housing and Economic Recovery Act of 2008 (HERA), Pub. L. No. 110-289 (July 30, 

2008), established FHFA, which is responsible for the safety and soundness and housing 

mission oversight of Fannie Mae, Freddie Mac, and the other housing governmentsponsored enterprise, the Federal Home Loan Bank System.

They share a 

primary mission that has been to stabilize and assist the U.S. secondary 

mortgage market and facilitate the flow of mortgage credit. To accomplish 

this goal, the enterprises issued debt and stock and used the proceeds to 

purchase conventional mortgages that met their underwriting 

2

Congress initially chartered Fannie Mae in 1938 but did not establish it as a shareholderowned corporation until 1968. Congress initially established Freddie Mac in 1970 as an 

entity within the Federal Home Loan Bank System and reestablished it as a shareholderowned corporation in 1989.

 
 

Page 2 GAO-12-849 Multifamily Housing Financing

standards from primary mortgage lenders such as banks or savings and 

loan associations (thrifts).3 In turn, banks and thrifts used the proceeds to 

originate additional mortgages. The enterprises purchased mortgages 

that they held in their portfolios or packaged into mortgage-backed 

securities (MBS), which were sold to investors in the secondary mortgage 

market.4 In exchange for a fee (the guarantee fee), the enterprises 

guaranteed the timely payment of interest and principal on MBS that they 

issued. Both enterprises are required to provide assistance to the 

secondary mortgage markets that includes purchases of mortgages that 

serve low- and moderate-income families. In 1992, Congress required the 

enterprises to meet numeric goals for the purchase of single- and 

multifamily conventional mortgages that serve targeted groups. Through 

2008, the Department of Housing and Urban Development (HUD) set the 

goals for each year; FHFA currently does so.5

Congress and the Executive Branch will face difficult decisions on how to 

restructure the enterprises and promote housing opportunities while 

limiting risks to taxpayers and the stability of financial markets. In this 

context, you requested that we provide information on the history and 

performance of the enterprises’ multifamily activities. Specifically, this 

report discusses (1) how the enterprises’ multifamily loan activities, 

products, and loan performance have changed over time, (2) the 

enterprises’ role in the multifamily housing financing marketplace and the 

extent to which they have met their affordable housing goals, and (3) how 

the enterprises’ credit standards and delinquency rates compare with 

those of other mortgage capital sources and how they have managed 

credit risk associated with their multifamily housing activities. 

To describe how the enterprises’ multifamily loan activities, products, and 

performance have changed, we analyzed loan-level data from Fannie 

Mae and Freddie Mac from 1994 (the earliest year for which data were 

available) through 2011. For example, we analyzed the following for each 

enterprise:

 

3

Conventional mortgages do not carry government insurance or guarantees and are the 

focus of this report. 

4

Each enterprise also holds some MBS in retained portfolio.

5

Federal Housing Enterprises Financial Safety and Soundness Act of 1992 (Safety and 

Soundness Act), Pub. L. No. 102-550, title XIII. HERA transferred HUD’s authorities and 

responsibilities for the goals to FHFA (§§ 1122, 1128). See 12 U.S.C. §§ 4561-4566. 
 

Page 3 GAO-12-849 Multifamily Housing Financing

• loans that were held in portfolio and loans that were securitized;

• loan purchases broken down by property and loan size, metropolitan 

area, and period of the loan; 

• maturity expectations for loans purchased; and 

• loan performance, including an analysis of annual serious delinquency 

rates. 

We also analyzed aggregated data on real estate-owned, net income, net 

charge-offs (debts an entity is unlikely to collect), and guarantee fees. To 

assess data reliability, we interviewed Fannie Mae and Freddie Mac 

representatives about how they collected data and helped ensure data 

integrity and reviewed internal reports on data reliability. We also 

compared selected enterprise data with information in public filings. In 

addition, we conducted reasonableness checks on the data to identify any 

missing, erroneous, or outlying figures. We determined that the data were 

sufficiently reliable for our purposes.

To determine what is known about the enterprises’ role in the overall 

multifamily marketplace, we reviewed reports and studies on how the 

enterprises helped support the market. To show how the enterprises’ 

market share changed over the last 7 years, we analyzed flow of funds 

data from the Board of Governors of the Federal Reserve System 

(Federal Reserve) and market share data from the Mortgage Bankers 

Association (MBA). We met with lender, commercial real estate, and life 

insurance trade associations; affordable housing advocacy groups; 

industry researchers; and representatives from FHFA, Fannie Mae, and 

Freddie Mac to obtain their views on the enterprises’ role. To report on 

the extent to which the enterprises met affordable housing goals, we used 

HUD data on annual goal performance in 1993 through 2000, and 

analyzed data on goal performance in Annual Housing Activity Reports 

(activity report) provided by FHFA for 2001 through 2009. To determine 

the extent to which the enterprises’ multifamily activities contributed to the 

achievement of specific goals, we calculated multifamily purchases as a 

percentage of total mortgage purchases under each goal using data from 

the activity reports.

6

 

6

The Safety and Soundness Act required Fannie Mae and Freddie Mac each to meet 

specific numeric goals for the purchase of mortgages serving targeted groups each year. 

Specifically, it directed HUD to promulgate regulations setting goals for both enterprises 

targeted at borrowers or renters who (1) have low and moderate incomes, (2) live in

underserved areas, and (3) have very low-income or have low-income and live in lowincome areas (known as the special affordable housing goal).

To assess the reliability of these data, we interviewed
 

Page 4 GAO-12-849 Multifamily Housing Financing

FHFA officials and representatives at Fannie Mae and Freddie Mac about 

how they collected and helped ensure the integrity of the information, and 

reviewed internal reports. We determined that the data were sufficiently 

reliable for our purposes.

To compare the enterprises’ credit standards and delinquency rates with 

those of major mortgage capital sources, we analyzed loan-level data on 

the enterprises’ loan-to-value (LTV) and debt-service coverage ratios and 

delinquency rates. We compared these ratios and delinquency rates with 

those of selected market players, including life insurance companies and 

commercial mortgage-backed securities (CMBS) lenders. We interviewed

officials from HUD’s Federal Housing Administration (FHA), the 

Department of Agriculture’s Rural Housing Service (RHS), the National

Council of State Housing Agencies (NCSHA), the National Association of 

Affordable Housing Lenders, the Commercial Real Estate Finance 

Council, and the American Council of Life Insurers (ACLI) to obtain 

information on the key credit standards generally used by institutions they

represent and their loan performance. To determine the extent to which 

the enterprises shared risk with FHA and RHS, we obtained data on the 

number of loans in risk-sharing programs. We also reviewed documents 

describing the programs and interviewed officials from Fannie Mae, 

Freddie Mac, FHA, and RHS. To describe how the enterprises managed 

credit risk associated with their multifamily activities, we reviewed FHFA’s 

examination reports and Office of Federal Housing Enterprise Oversight 

(OFHEO) and FHFA annual reports to Congress, which summarize credit 

risk issues identified during annual examinations of the enterprises.7

We conducted this performance audit from November 2011 to September 

2012 in accordance with generally accepted government auditing 

To 

describe how the enterprises have addressed or will address these 

issues, we reviewed the enterprises’ formal responses to FHFA’s 

examination reports and any subsequent FHFA responses. Because 

FHFA’s examination reports and the enterprises’ responses to them are 

confidential, we limited our discussions of them to a summary. We also 

made revisions based on concerns FHFA raised with our original 

language summarizing supervisory concerns expressed in examination 

reports.

 

7

OFHEO was an independent agency in HUD responsible for the enterprises’ safety and 

soundness. HERA created FHFA to oversee Fannie Mae and Freddie Mac and abolished 

OFHEO. 
 

Page 5 GAO-12-849 Multifamily Housing Financing

standards. Those standards require that we plan and perform the audit to 

obtain sufficient, appropriate evidence to provide a reasonable basis for 

our findings and conclusions based on our audit objectives. We believe 

that the evidence obtained provides a reasonable basis for our findings 

and conclusions based on our audit objectives. Appendix I contains 

additional information on our scope and methodology.

The multifamily housing finance market has three principal participants: 

(1) primary lenders, which originate mortgage loans; (2) secondary 

market institutions, which purchase mortgage loans from primary lenders; 

and (3) investors in securities issued by secondary market institutions that 

are backed by mortgage loans.8

Multifamily mortgages differ from single-family mortgages in several 

ways. A multifamily property is a cash-generating asset, with rental 

income used to pay the multifamily mortgage, while single-family 

properties are not generally cash-generating assets. Many single-family 

mortgages are 30-year, fully amortizing mortgages, while most multifamily 

loans have terms of 5, 7, or 10 years with a balloon payment due at 

maturity.

All three participants contribute to the 

flow of funds to the multifamily borrower. Lenders originate mortgages, 

which they may either retain as an income-earning asset (an approach 

called portfolio lending) or sell to a secondary market institution. The sale 

of these mortgages provides the lender with funds to make additional 

loans. A secondary market institution, in turn, purchases a mortgage and 

may retain it as a portfolio asset or use the individual loan or a pool of 

loans as collateral for a security. Investors then buy these securities from 

a lender or secondary market institution.

9

 

8

Fannie Mae and Freddie Mac, the focus of this report, are secondary market institutions 

that purchase conventional loans and issue securities backed by those loans. Ginnie Mae 

guarantees the timely payment of principal and interest on securities issued by financial 

institutions and backed by pools of federally insured or guaranteed mortgage loans.

Most multifamily loans also include protection for the investor 

against borrower prepayment (using a prepayment premium or other 

limitation on prepayment), while single-family loans generally do not. In 

addition, multifamily mortgages have different risk characteristics. For 

example, it is harder to predict credit risk for multifamily mortgages than 

9

Multifamily loans are made to borrowers under varying terms, but the balance is 

generally amortized over a term that is significantly longer than the life of the loan. As a 

result, there is little amortization of principal, resulting in a balloon payment at maturity.

Background 
 

Page 6 GAO-12-849 Multifamily Housing Financing

for single-family mortgages. Finally, securitizing multifamily loans (that is, 

packaging them into mortgage pools to support MBS) is more challenging 

because they are not as standardized as single-family loans. For 

example, the multifamily loan pools that back MBS have varied loan 

terms while single-family securities have historically been backed by 15-

year and 30-year mortgages. 

Fannie Mae and Freddie Mac were established to provide liquidity, 

stability, and affordability in the secondary market for both single- and 

multifamily mortgages. Their charters do not allow them to operate in the 

primary mortgage market by originating loans or lending money directly to 

consumers. Rather, they purchase mortgages that meet their underwriting 

standards from primary mortgage lenders, such as banks or thrifts, and 

either hold the mortgages in their portfolios or package them into MBS. 

Multifamily loans make up a small part of the enterprises’ total loan 

purchases. According to FHFA’s 2011 Annual Report to Congress, the 

enterprises purchased single-family mortgages with an unpaid principal 

balance of $879.0 billion and multifamily mortgages totaling $44.6 billion

in 2011. 

According to a 1998 article, Fannie Mae and Freddie Mac both entered 

the conventional multifamily loan market in 1983 and were experiencing 

significant losses by 1991.10 For example, the article stated that in 1991, 

Fannie Mae’s multifamily loans were 5.7 percent of all its loans, but 

multifamily charge-offs were 30.2 percent of its total charge-offs.11

Freddie Mac’s 1991 losses were even greater. According to the article, its 

multifamily loans were 2.6 percent of all loans, but multifamily charge-offs 

were 51.4 percent of its total charge-offs.12 Due to these losses, Freddie 

Mac exited the multifamily market for 3 years starting in 1991.13

 

10See Lawrence Goldberg and Charles A. Capone, Jr., “Multifamily Mortgage Credit Risk: 

Lessons from Recent History,” Cityscape, 4, no. 1 (1998). 

The same 

11The data on multifamily net charge-offs came from a Fannie Mae report prepared prior 

to its 2004 restatement of earnings. 

12The data on multifamily net charge-offs came from a Freddie Mac report prepared prior 

to its 2003 restatement of earnings.

13In October 1991, we identified internal control weaknesses in Freddie Mac’s multifamily 

program. We reported that in response to these weaknesses as well as to its financial 

losses, Freddie Mac suspended purchases in its major multifamily program. See GAO,

Federal Home Loan Mortgage Corporation: Abuses in Multifamily Program Increase 

Exposure to Financial Losses, GAO/RCED-92-6 (Washington, D.C.: Oct. 7, 1991).
 

Page 7 GAO-12-849 Multifamily Housing Financing

article noted that boom-and-bust cycles are common in the multifamily 

housing market due to the relative ease of entry into the industry. During 

periods of strong performance, new apartment supply increases, which 

leads to overexpansion and high vacancy rates. According to the authors, 

such a cycle contributed to the enterprises’ losses in the late 1980s. 

Fannie Mae currently participates in the multifamily mortgage finance 

market primarily through its Delegated Underwriting and Servicing (DUS®) 

program. Under this program, which was initiated in 1988, Fannie Mae 

approves lenders and delegates to them the authority to underwrite, 

close, and sell loans to the enterprise without its prior review.

14

Freddie Mac participates in the multifamily market by underwriting all of 

the loans it purchases.

In 

exchange for granting this authority, DUS lenders share the risk of loss 

with Fannie Mae. The most common loss-sharing structures are standard 

DUS loss sharing and pari passu. The standard model has a tiered loss 

system, generally with the maximum lender loss capped at the first 20 

percent of the original loan amount. Under the pari passu model, lenders 

share all losses on a pro rata basis with Fannie Mae (the lender assumes 

one-third of the loss and Fannie Mae two-thirds). A small portion of 

Fannie Mae’s multifamily business comprises non-DUS deliveries, which 

typically are small balance loans or pools of seasoned loans (loans that 

have typically been in a financial institution’s portfolio for at least 1 year 

and have a satisfactory repayment record). In 1994, Fannie Mae began 

securitizing DUS loans by creating DUS MBS, each of which is backed by 

a Fannie Mae guarantee to the investor of principal and interest. 

Typically, each DUS MBS pool contains one DUS loan, but can 

incorporate multiple DUS loans. 

15

 

14As of July 2012, Fannie Mae had 25 approved DUS lenders.

It purchases loans from a network of approved 

lenders, but completes the underwriting and credit reviews in-house.

Freddie Mac also conducts negotiated transactions or purchases of 

15According to Freddie Mac officials, from 2005 through 2009 underwriting on a small 

segment of Freddie Mac’s business, its targeted affordable loans, was performed by the 

targeted affordable seller/servicer on a delegated basis with risk shared by the 

seller/servicer and Freddie Mac. Targeted affordable loans include mortgages on 

properties subject to low-income housing tax credits, mortgages on properties that receive 

federal subsidies, and transactions in which Freddie Mac will credit enhance a mortgage 

that backs tax-exempt bonds, a trust certificate, or other instrument related to tax-exempt 

bonds. 
 

Page 8 GAO-12-849 Multifamily Housing Financing

seasoned loans. For a majority of its business, Freddie Mac sells a 

significant amount of multifamily credit risk, as defined by expected 

losses, to investors by issuing securities backed by its mortgages. In 

general, these securities, known as K‐deals, are backed by pools of 

newly originated mortgages underwritten by Freddie Mac.

16

In addition to Fannie Mae and Freddie Mac, the following entities

participate in the multifamily housing financing marketplace:

Loss-sharing 

arrangements such as Fannie Mae’s DUS program and Freddie Mac’s Kdeal program do not exist in either enterprise’s single-family business.

• Life insurance companies originate and hold in portfolio multifamily 

mortgages.

• CMBS lenders originate multifamily loans that are packaged into 

CMBS, which are MBS backed by commercial rather than residential 

properties. Commercial properties include multifamily housing as well 

as retail, office, and industrial space.

• Commercial banks and thrifts originate commercial and industrial 

loans, including loans secured by multifamily properties. They may 

retain these loans in their portfolios or sell them to the enterprises or 

other secondary market investors. 

• FHA insures multifamily loans originated by FHA-approved lenders for 

the construction, substantial rehabilitation, and acquisition and 

refinancing of apartments.

• RHS has a guaranteed loan program for rural multifamily housing.

• State and local housing finance agencies (HFA) are state or locally 

chartered authorities established to help meet the affordable housing 

needs of the residents of their states or localities. HFAs sell taxexempt housing bonds, commonly known as Multifamily Housing 

Bonds, to investors to finance multifamily housing production.

• Loan consortiums—which are organized by a group of commercial 

banks and savings institutions in a local housing market or at the state 

level to provide multifamily affordable construction and mortgage 

 

16Under the K-deal program, which began in 2008, certain loans are sold to a third-party 

depositor that deposits the loans into a third-party trust. The third-party trust issues 

private-label securities backed by the loans. Freddie Mac purchases and guarantees 

certain bonds issued by the third-party trust and securitizes these bonds through a 

Freddie Mac trust. The resulting certificates guaranteed by Freddie Mac are publicly 

offered. The third-party trust issues unguaranteed subordinate bonds that are privately 

offered to investors.
 

Page 9 GAO-12-849 Multifamily Housing Financing

loans—are primary lenders for multifamily housing with less than 50 

units.

From 1994 through 2011, the multifamily loan activities of Fannie Mae 

and Freddie Mac generally increased, while delinquency rates remained 

relatively low. During this period, the number of loans they purchased 

spiked in some years to meet goals for financing affordable housing. 

Fannie Mae has held a lower percentage of its loans in portfolio than 

Freddie Mac, but both enterprises have increased securitization activities 

in recent years partly in response to a mandate from the Department of 

the Treasury (Treasury) to reduce retained portfolios.17 Serious 

delinquency rates for the enterprises’ multifamily loans were generally 

less than 1 percent from 1994 through 2011, but the unpaid principal 

balance on seriously delinquent loans rose considerably starting in 2008.

For all of the analyses of Fannie Mae and Freddie Mac’s purchases, we 

adjusted the dollar amounts for inflation to 2012 dollars. As a result, the 

numbers we present are unlikely to correspond to similar numbers 

previously reported by the enterprises in their public disclosures.

From 1994 through 2011, the enterprises’ multifamily loan activities 

generally increased. As shown in figure 1, the enterprises’ annual 

purchases of multifamily loans (in terms of unpaid principal balances) 

dramatically increased starting in 2000, peaked in 2007 and 2008, and 

generally declined in the years following.

18

 

17FHFA, on behalf of the enterprises, entered into separate Senior Preferred Stock 

Purchase Agreements with Treasury on September 7, 2008. The purchase agreements 

prevented the loss of capital at the enterprises through a purchase of up to $100 billion of 

senior preferred stock in each enterprise as necessary to avoid a negative net worth. In 

2009, Treasury amended the agreements to increase the amount of support for each 

enterprise to the greater of (1) $200 billion or (2) $200 billion plus the cumulative total of 

deficiency amounts determined for calendar quarters in 2010, 2011, and 2012, less any

surplus amount determined as of December 31, 2012. In exchange for this support, the 

purchase agreements, as amended, required the mortgage asset portfolios of the 

enterprises to shrink by at least 10 percent (of the maximum amount they were permitted 

to hold at the end of the previous calendar year) every year until each enterprise’s 

holdings of mortgages reached a balance of $250 billion. Another amendment to the 

agreements in August 2012 changed the amount to 15 percent. This included both singleand multifamily mortgages. 

Fannie Mae’s purchases 

ranged from $6.3 billion in 1994 to $49.8 billion in 2007. Freddie Mac’s 

18Unpaid principal balance is the remaining outstanding balance on loans acquired and is 

a key metric the multifamily industry uses to measure portfolio activity.

The Enterprises’ 

Multifamily Loan 

Activities Generally 

Increased and 

Delinquencies 

Remained Low 

Multifamily Loan 

Purchases Peaked in 

Recent Years, with Some 

Fluctuation Tied to 

Housing Goals 
 

Page 10 GAO-12-849 Multifamily Housing Financing

purchases ranged from $885.5 million in 1994 to $25.5 billion in 2008. 

The enterprises’ annual loan purchases increased dramatically in 2007 

and 2008 as other participants exited the market during the financial 

crisis. 

Figure 1: Enterprises’ Annual Multifamily Loan Purchases by Number of Loans and Unpaid Principal Balance, 1994-2011

Note: All dollar figures are in 2012 dollars.

The enterprises’ multifamily activities (by number of loans acquired) 

varied over the period we reviewed, in some cases because the 

enterprises purchased additional loans to meet affordable housing goals. 

For example, Fannie Mae acquired a large number of loans in 2003 and 

2007, and Freddie Mac in 2003. According to Fannie Mae officials, the 

majority of these acquisitions were pools of seasoned multifamily loans 

purchased through negotiated transactions to meet affordable housing 
 

Page 11 GAO-12-849 Multifamily Housing Financing

goals for the purchase of mortgages that served targeted groups such as 

low- and moderate-income households. Freddie Mac officials offered a 

similar explanation for the increase in their 2003 purchases. From 2003 

through 2007, affordable housing goals were set as the percentage of the 

enterprises’ total (single-family and multifamily) mortgage purchases. 

Increased activity in the single-family financing market in 2003 and 2007 

(that is, more people buying and refinancing homes) meant that the 

enterprise needed to acquire more mortgages to meet affordable housing 

goals. As discussed in more detail later in this report, multifamily 

mortgages had a disproportionate importance for the housing goals 

because most multifamily housing serves targeted groups.

From 1994 through 2011, Fannie Mae retained a lower percentage of its 

annual multifamily loan purchases in portfolio at acquisition than Freddie 

Mac (see fig. 2).19 From 1994 through 2003, the majority of Fannie Mae’s 

multifamily loan purchases were packaged into MBS. The percentage of 

unpaid principal balance associated with these MBS ranged from 53 

percent ($3.3 billion) in 1994 to 86 percent ($14.3 billion) in 1998. From 

2004 through 2008, this trend reversed, with the majority of the unpaid 

principal balance of Fannie Mae’s loan acquisitions being held in portfolio 

as whole loans. The percentages held in portfolio ranged from 50 percent 

($10.8 billion) in 2004 to 82 percent ($41 billion) in 2007. Following the 

conservatorship, the majority of Fannie Mae’s loan purchases were again 

packaged into MBS, with the 2011 data showing that 98.6 percent ($24.1 

billion) of the unpaid principal balance of multifamily loans Fannie Mae 

acquired that year was securitized. As previously discussed, Treasury

required the enterprises to reduce their retained portfolios each year 

(starting in 2010) as a condition of agreements providing financial 

support.

 

19The enterprises’ multifamily portfolios also include various types of credit enhancements 

for tax-exempt bonds issued by state and local HFAs to finance affordable rental housing. 

Should the bonds default, the enterprises guarantee that they will provide supplemental 

funds to permit the continued payment of principal and interest to bondholders. The 

mortgages associated with these credit enhancements were included in the loan-level 

data provided by both enterprises. 

Fannie Mae Retained a 

Lower Percentage of 

Multifamily Loans Than 

Freddie Mac
 

Page 12 GAO-12-849 Multifamily Housing Financing

Figure 2: Enterprises’ Annual Volume of Retained Multifamily Loans, Securitized Multifamily Loans, and Multifamily Bond 

Credit Enhancements, 1994-2011

Note: All dollar figures are in 2012 dollars. Starting in 2008, Freddie Mac’s retained multifamily loans 

were comprised of loans held for investment and loans held for sale. According to Freddie Mac 

officials, loans held for investment were those it planned to hold in its portfolio until maturity. Loans 

held for sale were those that Freddie Mac initially held in its portfolio but planned to include in a Kdeal (that is, securitize) at a future time. (Table 1 shows the unpaid principal balance of loans held for 

investment and loans held for sale from 2008 through 2011.) This figure categorizes loans for 1994 

through 2011 based on whether they were retained in portfolio or securitized at acquisition. 

Prior to 2008, the majority of Freddie Mac’s multifamily business (in terms 

of unpaid principal balance) remained in its retained portfolio. Retained 

loans represented the majority of Freddie Mac’s multifamily business in 

every year from 1994 through 2007 except 2003. The percentage of 

unpaid principal balance retained ranged from 65 percent ($8.3 billion) in 
 

Page 13 GAO-12-849 Multifamily Housing Financing

2002 to 93 percent ($13 billion) in 2006. In 2003, the percentage of 

unpaid principal balance securitized was 51 percent ($9.3 billion), while 

the percentage retained was 45 percent ($8.1 billion). Bond credit 

enhancements constituted the remainder (4 percent) of its multifamily 

business in 2003.

Separate and apart from the portfolio reduction requirement in the 

preferred stock purchase agreement, Freddie Mac started a new program

in 2008, which it called K-certificates or K-deals, to securitize its loans

and sell a significant portion of the credit risk associated with the loans.

20

Table 1: Unpaid Principal Balance of Multifamily Loans That Freddie Mac Held for 

Investment and Held for Sale, 2008-2011

With the start of the K-deal program, Freddie Mac began categorizing 

multifamily loans it held in portfolio at acquisition as loans held for 

investment and loans held for sale. According to Freddie Mac officials, 

loans held for investment were those it planned to hold in its portfolio until 

maturity. Loans held for sale were those that Freddie Mac initially held in 

its portfolio but planned to include in a K-deal (that is, securitize) at a 

future time. According to officials, loans held for sale were almost always 

securitized. Table 1 shows the unpaid principal balance of loans held for 

investment and loans held for sale from 2008 through 2011. Loans held 

for sale had become the predominant loan type by 2010.

Acquisition 

year

Unpaid principal balance of 

loans held for investment

(dollars in millions)

Unpaid principal balance of 

loans held for sale

(dollars in millions)

2008 $19,600 $497

2009 11,840 4,826

2010 2,988 10,598

2011 2,391 16,642

Source: GAO analysis of Freddie Mac data.

Note: All dollar figures are in 2012 dollars.

The enterprises may hold their own MBS in their retained portfolio. Fannie 

Mae officials indicated that MBS it purchased were typically either resold 

in their original state or resecuritized with the purpose of making them a 

more suitable investment for a broader range of participants. They noted 

 

20Freddie Mac piloted K-deals in 2006.
 

Page 14 GAO-12-849 Multifamily Housing Financing

that their goal was to hold MBS purchases temporarily and to operate in a 

manner that is consistent with the FHFA directive to reduce the size of the

retained mortgage portfolio. Data on Fannie Mae’s multifamily MBS 

portfolio balance for 2010 through 2011 showed that its portfolio grew 

from $9.5 billion at the beginning of 2010 to $28.3 billion at the end of 

2011. The majority of this growth was due to the securitization of 

multifamily whole loans previously held in their portfolio with an unpaid 

principal balance of $18.7 billion. Fannie Mae started this initiative in the 

fourth quarter of 2010 in response to Treasury’s requirement to reduce its 

retained portfolio. Its sales and purchases of multifamily MBS in the 

secondary market were about the same. For example, during 2011 it 

purchased and sold MBS totaling about $11 billion. Data on Freddie 

Mac’s purchases of its own MBS in 2010 and 2011 show that the 

enterprise purchased $382 million and $472 million, respectively. These 

amounts were about 4 percent of the MBS issued each year.

The majority of Fannie Mae and Freddie Mac’s purchases of multifamily 

loans, as measured by unpaid principal balance, were for properties with 

more than 50 units (see fig. 3). For example, from 1994 through 2011, 

Fannie Mae acquired $292.0 billion of multifamily loans for properties with 

more than 50 units, compared to $56.2 billion of loans for properties with 

5 to 50 units. Similarly, Freddie Mac acquired $199.1 billion of multifamily 

loans for properties with more than 50 units, compared to $15.4 billion of 

loans for properties with 5 to 50 units. While the majority of the unpaid 

principal balance was on loans for properties with more than 50 units, the 

enterprises acquired more loans for properties with 5 to 50 units over this 

period. For example, from 1994 through 2011 Fannie Mae purchased 

62,353 multifamily loans for properties with 5 to 50 units and 33,178 loans 

for properties with more than 50 units. Similarly, Freddie Mac purchased 

20,900 multifamily loans for properties with 5 to 50 units and 15,817 loans 

for properties with more than 50 units. 

Enterprises Generally 

Financed Large 

Multifamily Properties in 

Large Metropolitan Areas

Size of Multifamily Properties 

Financed 
 

Page 15 GAO-12-849 Multifamily Housing Financing

Figure 3: Enterprises’ Multifamily Loan Purchases by Unit Size of Properties, 1994-2011

Note: All dollar figures are in 2012 dollars.

Both enterprises purchased the highest number of loans for properties 

with 5 to 50 units in 2003. According to FHFA officials, the enterprises 

purchased a large number of loans for smaller properties that year 

because they received “bonus points” toward meeting their affordable 
 

Page 16 GAO-12-849 Multifamily Housing Financing

housing goals when they purchased these mortgages.21

The majority of the multifamily loans that the enterprises purchased, as 

measured by unpaid principal balances, were for loans with balances at 

acquisition of $5 million to less than $50 million (see fig. 4). From 1994 

through 2011, Fannie Mae purchased $203.5 billion of multifamily loans in 

this category, while Freddie Mac purchased $155.1 billion of multifamily 

loans of this size.

Fannie Mae also 

purchased a large number of loans for properties with 5 to 50 units in 

2007. As noted previously, these purchases helped them meet their 

affordable housing goals that year although the bonus points were no 

longer in effect. Freddie Mac purchased the vast majority of its loans for 

smaller properties in 2001 through 2003, when the bonus points were in 

effect. Since 2005, Freddie Mac has purchased very few multifamily loans 

for smaller properties. According to Freddie Mac officials, the enterprise is 

not currently active in the small multifamily loan market in part because of 

the credit characteristics of these loans. While they are considered by 

definition to be "multifamily" properties because they have five or more 

units, these transactions generally need to be underwritten more similarly 

to single-family loans. Freddie Mac officials noted that because the cost 

of underwriting is essentially the same for loans on larger and smaller 

properties, purchasing loans on small income properties on an individual 

loan basis is less cost-effective than the purchase of individual loans on 

larger properties. We discuss the enterprises’ role in this market segment 

in more detail later in this report.

 

21Specifically, in calculating goal performance each goal-qualifying unit financed in a 5 to 

50 unit property counted as two units in the numerator, and one unit in the denominator. 

Size of Multifamily Loans at 

Acquisition
 

Page 17 GAO-12-849 Multifamily Housing Financing

Figure 4: Enterprises’ Annual Multifamily Loan Purchases by Loan Size at Acquisition, 1994-2011

Note: All dollar figures are in 2012 dollars.

While the majority of the unpaid principal balance was on multifamily 

loans with balances at acquisition of $5 million to less than $50 million, 

the enterprises acquired more multifamily loans with balances at 

acquisition of less than $5 million. For example, from 1994 through 2011 

Fannie Mae purchased 81,156 multifamily loans with balances at 

acquisition of less than $5 million and 15,425 multifamily loans with larger 

loan balances. Similarly, Freddie Mac purchased 26,944 multifamily loans 

with balances at acquisition of less than $5 million and 10,202 multifamily 

loans with larger loan balances. 
 

Page 18 GAO-12-849 Multifamily Housing Financing

The majority of the multifamily loans that the enterprises purchased were 

loans for properties in the largest metropolitan areas. We used 2010 U.S. 

Census Bureau data to identify the 25 largest metropolitan statistical 

areas (MSA) by population.

22 Data from the 2010 American Community 

Survey show that 56.3 percent of the nation’s multifamily housing was 

located in these 25 MSAs. For Fannie Mae, 69 percent of the unpaid 

principal balance of multifamily loans it purchased from 1994 through 

2011 was for properties located in these 25 MSAs (see fig. 5). 

 

22The Office of Management and Budget defines MSAs for use by federal statistical 

agencies in collecting, tabulating, and publishing statistics. They contain a core urban area 

with a population of 50,000 or more.

Geographic Location of 

Multifamily Properties 

Financed 
Page 19 GAO-12-849 Multifamily Housing Financing

Figure 5: Fannie Mae’s Annual Purchases of Multifamily Loans in 25 Largest Metropolitan Areas, 1994-2011 

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Page 20 GAO-12-849 Multifamily Housing Financing

Further, from 1994 through 2011, the loans that Freddie Mac purchased 

for properties in the 25 largest MSAs constituted 68 percent of its unpaid 

principal balance (see fig. 6). For information on both enterprises’ 

purchases by metropolitan area and state, see appendixes II and III, 

respectively.
Page 21 GAO-12-849 Multifamily Housing Financing

Figure 6: Freddie Mac’s Annual Purchases of Multifamily Loans in 25 Largest Metropolitan Areas, 1994-2011 

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Page 22 GAO-12-849 Multifamily Housing Financing

In terms of unpaid principal balance, over half of the multifamily loans that 

Fannie Mae purchased and almost half of the multifamily loans that 

Freddie Mac purchased from 1994 through 2011 were loans with terms of 

60, 84, and 120 months (5, 7, and 10 years). This is in contrast to singlefamily mortgages purchased by the enterprises, many of which were 30-

year mortgages.

Figure 7 shows that with some exceptions the enterprises annually

purchased more multifamily loans with terms of 120 months than any 

other category. The exceptions were 1994-1995 and 2003 for Fannie Mae 

and 1994 and 2001-2007 for Freddie Mac. During these years, loans with 

terms longer than 120 months generally constituted the largest category. 

According to Fannie Mae officials, the enterprise has periodically

purchased pools of seasoned loans with loan terms greater than 120 

months.

Multifamily Loan Terms 
 

Page 23 GAO-12-849 Multifamily Housing Financing

Figure 7: Fannie Mae and Freddie Mac Multifamily Loan Terms, 1994-2011

Note: All dollar figures are in 2012 dollars.

The enterprises acquired multifamily loans for a variety of asset classes—

traditional rental, student, senior, manufactured, and cooperative 

housing—but the majority of the multifamily properties that they financed 

Multifamily Asset Class 
 

Page 24 GAO-12-849 Multifamily Housing Financing

from 1994 through 2011 were traditional rental properties.23 As shown in 

figure 8, 87.7 percent of Fannie Mae’s multifamily mortgage purchases 

during this period and 91.6 percent of Freddie Mac’s multifamily mortgage 

purchases were loans for traditional rental housing.24 The enterprises 

explained this occurred because the majority of the multifamily mortgage 

market is concentrated in traditional rental housing.

 

23Traditional multifamily rental housing is housing with five or more units that is not 

student, senior, manufactured, or cooperative housing. Multifamily loans for student 

housing are secured by properties in which college or graduate students make up at least 

80 percent of the tenants, among other requirements. Multifamily loans for senior housing 

are secured by properties intended to be for residents aged 55 or older and that provide 

additional services for residents, such as group meals. Multifamily loans for manufactured 

housing are secured by a residential development that consists of sites for manufactured 

homes and includes infrastructure. A cooperative loan is a multifamily loan made to a 

cooperative housing corporation and secured by a first or second subordinate lien on a 

cooperative multifamily housing project that contains five or more units. 

24According to Freddie Mac officials, they tend to report on their multifamily purchases as 

either traditional rental housing loans or targeted affordable loans. Targeted affordable 

loans include mortgages on properties subject to low-income housing tax credits, 

mortgages on properties that receive federal subsidies, and transactions in which Freddie 

Mac will credit enhance a mortgage that backs tax-exempt bonds, a trust certificate, or 

other instrument related to tax-exempt bonds. 
 

Page 25 GAO-12-849 Multifamily Housing Financing

Figure 8: Enterprises’ Multifamily Loan Purchases by Asset Class, 1994-2011

Note: Manufactured housing is not reflected on the Freddie Mac pie chart because it only purchased 

two of these loans from 1994 through 2011.

While the vast majority of the multifamily loans that the enterprises 

purchased from 1994 through 2011 were fixed-rate loans, they also 

acquired a large number of adjustable-rate mortgages (ARM) in 2003 that 

coincided with the acquisition of seasoned loans to meet affordable 

housing goals described earlier (see fig. 9). From 1994 through 2011,

Fannie Mae purchased $291.8 billion in fixed-rate mortgages and $87 

billion in ARMs, and Freddie Mac purchased $165.1 billion in fixed-rate 

mortgages and $48.6 billion in ARMs. During this period, yearly fixed-rate 

purchases typically represented 67 percent or more of all multifamily 

mortgage purchases (in terms of unpaid principal balances). However, in 

2003 Fannie Mae’s purchases of fixed-rate mortgages fell to 54 percent 

of all multifamily purchases and Freddie Mac’s to 47 percent. According 

to Fannie Mae officials, multifamily borrowers typically selected ARMs 

Type of Interest Rate for 

Multifamily Loans
 

Page 26 GAO-12-849 Multifamily Housing Financing

when they wanted to maintain greater prepayment flexibility and when the 

interest rate environment favored ARMs. According to Freddie Mac 

officials, the majority of ARMs that the enterprise has acquired are related 

to the affordable business described earlier in the report. 

Figure 9: Enterprises’ Annual Multifamily Loan Purchases by Interest Rate Type, 1994-2011

Note: During the first 4 years we analyzed, Freddie Mac purchased no ARM multifamily loans.

The enterprises exhibited some differences in their approaches to 

purchasing multifamily loans from 1994 through 2011. For example, both 

enterprises provided a structuring option that allowed a borrower to 

arrange financing terms for a group of loans and properties, but Fannie 

Structured Multifamily Finance 

and Fannie Mae’s DUS Program 
 

Page 27 GAO-12-849 Multifamily Housing Financing

Mae much more so than Freddie Mac.25 At Fannie Mae, these 

transactions could involve multiple properties financed by one loan, 

multiple properties financed by multiple loans, or one property financed by 

multiple loans. For certain transactions, the number of loans and 

properties can change over time as the borrower sells certain properties 

and acquires new ones, and needs new infusions of capital to finance 

these acquisitions. At Freddie Mac, such transactions could involve 

multiple properties financed by one loan or one property financed by 

multiple loans. Although most of Fannie Mae’s multifamily purchases 

continued to involve one property financed by one loan, it started 

engaging in these transactions in a significant way in the early 2000s (see 

fig. 10). By 2007, 16 percent ($8 billion) of Fannie Mae’s loan acquisitions 

occurred within transactions featuring multiple loans for multiple 

properties. Also in 2007, 20 percent ($10 billion) of Fannie Mae’s loan 

acquisitions occurred within transactions featuring one loan for multiple 

properties. In contrast, from 1994 through 2011 Freddie Mac’s 

transactions involving multiple loans or multiple properties represented 

about 0.1 percent of the loans it purchased and about 1 percent of its 

unpaid principal balance. 

 

25Fannie Mae’s multifamily transactions involving multiple loans and multiple properties 

may be characterized by cross-collateralized and cross-defaulted loans. Crosscollateralization uses multiple properties to secure one loan. When such loans are also 

cross-defaulted, a default on one loan triggers default on the rest. Similar transactions 

undertaken by Freddie Mac are also characterized by a pool of cross-collateralized and 

cross-defaulted loans. 
 

Page 28 GAO-12-849 Multifamily Housing Financing

Figure 10: Fannie Mae’s Use of Various Multifamily Structuring Options

Note: All dollar figures are in 2012 dollars.

In contrast to Freddie Mac, which underwrites all the loans it purchases, 

Fannie Mae delegates the majority of its underwriting (based on unpaid 

principal balance) through its DUS program. From 1994 through 2011, 

loans purchased under the DUS program represented the majority of 

Fannie Mae’s multifamily loan purchases in terms of unpaid principal 

balance for every year except 1994, 1995, 2003, and 2007 (see fig. 11, 

left). A smaller portion of Fannie Mae’s multifamily business comprised 

non-DUS deliveries, which typically were small balance loans or pools of 

seasoned loans. 
 

Page 29 GAO-12-849 Multifamily Housing Financing

Figure 11: Fannie Mae’s Annual Multifamily Loan Purchases by Type of Underwriting, 1994-2011

Note: All dollar figures are in 2012 dollars.

However, based on total loan counts, non-DUS loans constituted the 

majority of multifamily loans in 10 of the 18 years we reviewed (see fig. 

11, right). In addition, some of the years in which non-DUS loans were the 

majority were the same years in which the enterprises acquired many 

more multifamily loans to meet housing goals. For example, in 2003 

Fannie Mae purchased 16,322 non-DUS loans (representing $19.8 billion 

in unpaid principal balance) and 1,995 DUS loans (representing $18.7 

billion), and in 2007 it purchased 11,819 non-DUS loans (representing 

$27.0 billion) and 2,552 DUS loans (representing $22.8 billion). 
 

Page 30 GAO-12-849 Multifamily Housing Financing

From 1994 through 2011, Fannie Mae and Freddie Mac’s multifamily 

serious delinquency rates, based on unpaid principal balances, were 

below 1 percent with the exception of Fannie Mae in 1994 (see fig. 12).26

However, starting in 2008 Fannie Mae’s serious delinquency rates and 

the total unpaid principal balance of seriously delinquent loans increased. 

For example, in 2008 the unpaid principal balance of seriously delinquent 

loans was $500.9 million (0.29 percent), but rose to $1.3 billion (0.70 

percent) in 2010 and dropped to $1.1 billion (0.58 percent) in 2011. 

Freddie Mac also saw a rise in serious delinquency rates and the unpaid 

principal balance of seriously delinquent loans starting in 2008. In that 

year, the unpaid principal balance of delinquent loans was $31.5 million 

(0.03 percent), but increased to $293.9 million (0.26 percent) in 2010 and 

dropped to $259.7 million (0.22 percent) in 2011. These increases in 

serious delinquency rates and seriously delinquent unpaid principal 

balances in 2008 through 2011 could be attributable to loans purchased 

in prior years.27 However, past performance is not necessarily indicative 

of future performance. As the enterprises continue to purchase 

multifamily mortgages, the quality of such loans and economic conditions 

will influence delinquency rates.

 

26Fannie Mae and Freddie Mac classify multifamily loans as seriously delinquent when 

payment is 60 days or more past due. Our analyses of delinquency rates are based on the 

unpaid principal balance of outstanding loans at the end of each year. Later in this report, 

we present the delinquency rates for loans acquired or guaranteed in particular years and 

compare the enterprises’ delinquency rates with those of other major market participants. 

27As shown later in this report, Fannie Mae’s serious delinquency rates for multifamily 

loans acquired in 2005 through 2010 were highest for 2007 and 2008. During the same 

period, Freddie Mac’s serious delinquency rates were highest in 2006 and 2007.

Enterprises’ Multifamily 

Serious Delinquency Rates 

Were Low 
 

Page 31 GAO-12-849 Multifamily Housing Financing

Figure 12: Unpaid Principal Balances of Enterprises’ Seriously Delinquent Multifamily Loans and Multifamily Portfolio Serious 

Delinquency Rates, 1994-2011

Note: For Freddie Mac, delinquency rates were 0 percent in 1994, 1995, 1997, 1998, and 2000.

Similar to delinquencies, the unpaid principal balance of Fannie Mae and 

Freddie Mac’s multifamily loans associated with real estate-owned (REO) 

properties—those acquired through foreclosure—remained low overall

but increased in recent years. From 2002 to 2011, Fannie Mae’s unpaid 

principal balance on REO properties ranged from $9 million in 2002 to 

$1.2 billion in 2010 (see fig. 13). Total end-of-year unpaid principal 

balance has increased substantially for Fannie Mae since 2007, which 

was the beginning of the financial crisis. After 1995, Freddie Mac’s 

portfolio of multifamily REO (by unpaid principal balance) remained low 

until 2010, increasing from $52 million in 2009 to $171 million in 2010. 
 

Page 32 GAO-12-849 Multifamily Housing Financing

Figure 13: Unpaid Principal Balances of Enterprises’ Multifamily REO Property and Multifamily REO Property as a Percentage 

of Multifamily Book of Business, 1995-2011

Note: Fannie Mae could not provide data before 2002 because this was prior to its restatement of 

earnings. Freddie Mac was not able to provide data for 1994.

While the enterprises’ multifamily serious delinquency rates remained low 

from 1994 to 2011, many of their multifamily loans will mature in the next 

10 years. Specifically, a majority of the loans the enterprises currently 

hold are scheduled to mature by 2018. Between 2012 and 2018, 20,703 

of the loans that Fannie Mae purchased (52.5 percent of its multifamily 
 

Page 33 GAO-12-849 Multifamily Housing Financing

portfolio as of December 2011) are scheduled to mature. The unpaid 

principal balance of these loans is $108 billion, or 58.4 percent of Fannie 

Mae’s total multifamily unpaid principal balance as of December 2011. 

Between 2012 and 2018, 5,975 of the loans that Freddie Mac purchased 

(57.2 percent of its portfolio as of December 2011) are scheduled to 

mature. This represents $69.7 billion, or 60.1 percent of Freddie Mac’s 

unpaid principal balance as of December 2011.

From 2002 through 2011, Fannie Mae and Freddie Mac’s multifamily 

business operations generally were profitable, except for losses both 

enterprises reported for 2008 and 2009. We reviewed three measures 

affecting profitability: net income, net charge-offs, and guarantee fees.28

Due to differences in the business structures of the enterprises, net 

income figures cannot be directly compared between enterprises.29

Fannie Mae’s multifamily business reported positive net income every 

year from 2002 through 2011 except for 2008 and 2009 (see fig. 14). In 

those years, it lost $2.2 billion and $9 billion, respectively. Fannie Mae 

had to write off low-income housing tax credit (LIHTC) investments, which 

constituted the majority of the loss reported for 2009.30 Freddie Mac’s 

multifamily business reported positive net income every year from 2005 to 

2011 except for 2008 and 2009. In those years, it lost $57 million and $3 

billion, respectively. Similar to Fannie Mae, the loss Freddie Mac reported 

for 2009 was primarily due to LIHTC write-offs. 

 

28For Freddie Mac, we also discuss gain on sales of mortgages. 

29For example, Fannie Mae’s net income figures do not include net income from its capital 

markets division, which buys and sells multifamily and single-family MBS. Freddie Mac’s 

net income figures are for its entire multifamily business.

30LIHTC is the primary program for the creation and preservation of rental housing that is 

affordable for low- and very low-income households. In February 2010, FHFA determined 

that the sale of any LIHTC investments made by the enterprises would require the consent 

of Treasury under the terms of the preferred stock purchase agreements. After FHFA 

consulted with Treasury, it decided that the enterprises could not sell or transfer the 

assets and required them to write down the value of the LIHTC investments to zero, 

causing substantial losses for the enterprises. This decision was reflected in the 2009 

year-end financial statements, which were published in March 2010.

Enterprises’ Multifamily 

Activity Generally Was 

Profitable 

Multifamily Net Income
 

Page 34 GAO-12-849 Multifamily Housing Financing

Figure 14: Net Income Attributable to Fannie Mae and Freddie Mac’s Multifamily Business, 2002-2011

Note: Fannie Mae data were not available before 2002, and Freddie Mac data were not available 

before 2005.

Net multifamily charge-offs increased in recent years, mirroring the rise in 

serious delinquencies shown earlier.

31

 

31Fannie Mae and Freddie Mac define net multifamily charge-offs as the realization of 

losses on loans that have been deemed uncollectible, typically due to foreclosure.

From 2002 to 2008, net chargeoffs in Fannie Mae’s multifamily business segment remained at or below 

$34 million annually (see fig. 15). Since 2008, annual net charge-offs 

have risen dramatically, peaking at $446 million (a loss rate of 0.61 

percent) in 2010. From 2002 to 2008, annual net charge-offs in Freddie 

Mac’s multifamily business segment remained at or below $8 million, with 

one year during that period resulting in a net gain. However, since 2008, 

annual net charge-offs have risen, including a net charge-off of $103 

million (a loss rate of 0.10 percent) in 2010. 

Multifamily Net Charge-offs
 

Page 35 GAO-12-849 Multifamily Housing Financing

Figure 15: Net Charge-offs Attributable to Fannie Mae and Freddie Mac’s Multifamily Business, 2002-2011

Note: Fannie Mae data were not available before 2002, and Freddie Mac data were not available 

before 1997.

Multifamily guarantee fees for both enterprises grew from 2002 to 2011. 

Fannie Mae’s guarantee fees are compensation received for assuming 

and managing credit risk on the mortgage loans underlying its MBS, 

multifamily loans held in its portfolio, and other mortgage-related 

securities. From 2002 through 2011, Fannie Mae’s multifamily business 

received between $271 million and $884 million in guarantee fees 

annually, as shown in figure 16. Guarantee fees—which are charged to 

investors for guaranteeing the payment of principal and interest on 

multifamily mortgage-related securities and mortgages underlying 

multifamily housing revenue bonds—are a relatively small source of 

revenue for Freddie Mac. From 2002 through 2011, Freddie Mac’s 

multifamily business received between $38 million and $127 million in 

guarantee fees annually. 

Multifamily Guarantee Fees
 

Page 36 GAO-12-849 Multifamily Housing Financing

Figure 16: Multifamily Guarantee Fees Received by Fannie Mae and Freddie Mac, 2002-2011 

Note: Fannie Mae data were not available before 2002, and Freddie Mac data were not available 

before 2001.

According to Freddie Mac officials, the gains (or losses) on mortgages 

held for sale have become a bigger driver of net income than guarantee 

fees. Freddie Mac’s total gain on loans held for securitization is 

represented by both the gains it receives while the loans are held in 

portfolio awaiting securitization and gains it receives upon securitizing the 

loans. With the expansion of its securitization business, or K-deal 

program, combined gains on the sale of mortgages have increased from 

$14 million in 2008 to $300 million in 2011. 

Fannie Mae and Freddie Mac have played an increasingly large role in 

the multifamily marketplace since the beginning of the financial crisis in

2007, as evidenced by the increase in their market share. Although 

empirical research on the enterprises’ role in multifamily housing 

financing is limited, the literature we reviewed generally stated that the 

enterprises have provided liquidity and market stability. The enterprises 

met their affordable housing goals in most years, with multifamily 

activities greatly contributing to their fulfillment. 

Enterprises Increased 

Their Multifamily 

Market Share and 

Generally Met 

Affordable Housing 

Goals 
 

Page 37 GAO-12-849 Multifamily Housing Financing

Although the enterprises historically have played a smaller role in 

financing multifamily housing than single-family housing, their role in the 

multifamily housing financing marketplace has grown since the financial 

crisis began in 2007, as evidenced by the increase in their market share. 

We relied on two sources of data on market share in the multifamily 

housing financing marketplace from 2005 through 2011: (1) data from the 

Federal Reserve on all multifamily mortgage debt outstanding and (2) 

MBA data on sources of financing for mortgages originated in a given 

year. Our analysis of Federal Reserve data shows that as of the end of 

2011, the enterprises held or guaranteed almost 34 percent of the 

outstanding multifamily mortgage debt compared to about 24 percent in 

2005 (see fig. 17). 

Enterprises’ Multifamily 

Market Share Has Grown 

Since the Financial Crisis 
 

Page 38 GAO-12-849 Multifamily Housing Financing

Figure 17: Multifamily Mortgage Debt Outstanding, 2005-2011 

a

Includes multifamily mortgages held by the Farmers Home Administration (currently the Department 

of Agriculture’s Rural Economic and Community Development Service), FHA, the Department of 

Veterans Affairs, and the Federal Deposit Insurance Corporation.

b

Other holders include foreign banking offices in the United States, private pension funds, and real 

estate investment trusts.

c

Includes retirement funds.

d

Includes enterprise-backed mortgage pools.

According to MBA data on the financing of loans by investor type, the 

enterprises financed less than 30 percent of annual multifamily loans 

originated before 2008 (see fig. 18). Their share of the multifamily market 

increased to 86 percent in 2009, but decreased to about 57 percent in 

2011 as other participants reentered the market. These data are based 
 

Page 39 GAO-12-849 Multifamily Housing Financing

on MBA’s annual survey of large institutional lenders, which it defines as

firms with a dedicated commercial/multifamily origination platform.32

Figure 18: Financing of Multifamily Loans Originated, 2005-2011

 

Note: According to MBA, institutional lenders do not include small banks and thrifts. Percentages may 

not add to 100 because of rounding.

Finally, our analysis of data from the enterprises and two major 

participants in the multifamily housing financing marketplace—life 

insurance companies and CMBS lenders—illustrates how these 

participants’ multifamily activities have changed over time. While the 

 

32Ninety-nine firms participated in MBA’s 2011 origination survey, including life insurance 

companies, conduits for CMBS, lenders that sell loans to Fannie Mae and Freddie Mac, 

FHA lenders, and other lender groups. The survey did not include small banks and thrifts 

because they tend to operate as a separate market, according to MBA. Although not 

comprehensive, the survey data from MBA are the data most often cited when discussing 

the enterprises’ share of the multifamily housing financing marketplace. 
 

Page 40 GAO-12-849 Multifamily Housing Financing

enterprises’ role in the multifamily housing finance marketplace was about 

equal to that of the combined total of originations for life insurance 

companies and CMBS lenders before the financial crisis (2005 through 

2006), Fannie Mae and Freddie Mac dominated the marketplace during 

the height of the crisis (2008 through 2009) as life insurance companies 

and CMBS lenders significantly reduced their presence in the market. 

Data from the enterprises, ACLI, and Trepp show that by 2008, the 

enterprises’ combined purchases were almost $60 billion compared with 

almost $4 billion for life insurance companies and CMBS lenders 

combined (see table 2).33

Table 2: Principal Balance of Multifamily Loans Purchased by the Enterprises and Multifamily Loans Originated by Life 

Insurance Companies and CMBS Lenders, 2005-2011

The data from ACLI and Trepp also showed 

that life insurance companies and CMBS lenders started reentering the 

market in 2010.

Acquisition or 

origination year

Fannie Mae (dollars 

in millions)a Freddie Mac (dollars 

in millions)a Life insurance companies (dollars in millions)b CMBS lenders (dollars in millions)b

2005 $22,844 $10,768 $7,636 $21,837

2006 22,233 12,669 11,167 27,399

2007 46,297 22,644 9,709 32,750

2008 34,691 24,165 2,872 1,087

2009 19,537 17,063 564 0 

2010 16,832 14,508 4,651 380

2011 24,177 19,993 11,136 1,319

Sources: GAO analysis of Fannie Mae and Freddie Mac data; ACLI; and Trepp.

a

The amounts for Fannie Mae and Freddie Mac are the unpaid principal balance on loans acquired 

each year and are not adjusted for inflation.

b

The amounts for life insurance companies and CMBS lenders are the original principal balance on 

loans originated each year and are not adjusted for inflation.

 

33Trepp is a provider of CMBS analytics, data, consulting, and software to the securities 

and investment management industry.
 

Page 41 GAO-12-849 Multifamily Housing Financing

Based on our reviews of existing literature and interviews with 

stakeholders, the enterprises have provided access to multifamily 

financing although some view their role in the small-loan market segment 

as limited. Our review of the available literature on the role the enterprises 

have played in the secondary market for multifamily housing revealed few 

studies on this issue, partly due to the long-standing emphasis on Fannie 

Mae and Freddie Mac’s single-family portfolios. Additionally, the studies

we found generally lacked both empirical research and a balanced 

analysis of the benefits and costs of the enterprises. This was driven, in 

part, by the lack of publicly available data on the enterprises’ multifamily 

activities and on the multifamily housing finance marketplace as a whole.

However, the available literature we reviewed included statements that 

the enterprises have provided liquidity, stability, and affordability.34 For 

example, five of the seven studies we reviewed stated that the 

enterprises have helped ensure a robust financing system for multifamily 

housing by providing vital liquidity and counter-cyclical stability, but did 

not include empirical evidence supporting these statements.35 According 

to these studies, Fannie Mae and Freddie Mac have provided capital to 

the secondary mortgage market for multifamily financing during all 

economic climates, including times of credit market stress. One study

cited certain instances in which the enterprises had provided liquidity (in 

the wake of the currency crisis in 1998, after the 2001 recession, and in 

2007 through 2008 when purely private sources withdrew or charged 

untenable interest rates).36

 

34To a lesser extent, the literature also noted that Fannie Mae and Freddie Mac have 

helped set underwriting standards in the multifamily market. 

 

35See Mortgage Finance Working Group’s Multifamily Subcommittee, Center for American 

Progress, A Responsible Market for Rental Housing Finance: Envisioning the Future of 

the U.S. Secondary Market for Multifamily Residential Rental Mortgages (October 2010); 

Denise DiPasquale, “Rental Housing: Current Market Conditions and the Role of Federal 

Policy,” Cityscape, 13, no. 2 (2011); Ingrid Gould Ellen, John Napier Tye, and Mark A. 

Willis, Improving U.S. Housing Finance through Reform of Fannie Mae and Freddie Mac: 

Assessing the Options (NYU Furman Center for Real Estate and Urban Policy: May 

2010); Joint Center for Housing Studies, Harvard University, Meeting Multifamily Housing 

Finance Needs During and After the Credit Crisis (2009); and Ethan Handelman, David A. 

Smith, and Todd Trehubenko, Government-Sponsored Enterprises and Multifamily 

Housing Finance: Refocusing on Core Functions, report prepared for the National Housing 

Conference (October 2010).

36Joint Center for Housing Studies, Harvard University, Meeting Multifamily Housing 

Finance Needs During and After the Credit Crisis (2009). 

Few Studies Examined 

Enterprises’ Role in 

Multifamily Market but 

Most Noted Positive 

Effects 
 

Page 42 GAO-12-849 Multifamily Housing Financing

Most mortgage finance and housing policy groups with whom we spoke 

generally agreed that the enterprises had provided liquidity and countercyclical stability. They agreed that the enterprises were a major source of 

funding for multifamily projects during the recent financial crisis. 

According to one group, the flight of traditional providers of private capital 

(such as banks and life insurance companies) would have been more 

devastating to renters had it not been for the enterprises’ presence.

The five studies we cited previously also stated that the enterprises 

generally promoted access to affordable rental housing. As discussed in 

more detail later in this report, the enterprises must meet affordable 

housing goals for targeted groups such as low- and moderate-income 

households. One study stated, “the government’s involvement in ensuring 

that capital is available during times of credit contraction is a critical factor 

in mitigating fluctuations in the supply of market-rate and affordably priced 

rental housing.”37 All five studies discussed the role the enterprises have 

played in the LIHTC program. For example, one housing policy group 

wrote that the enterprises have acted both as equity investors and 

purchasers of mortgages for affordable housing developments financed 

by the LIHTC program.38

While representatives of most of the groups we interviewed stated that 

Fannie Mae and Freddie Mac generally had played a role in providing 

access to affordable rental housing, they emphasized that the enterprises 

could do more. For example, one association told us that the affordable 

housing goal levels are generally set too low. In its comment letter on 

It noted that through their loan purchases, the 

enterprises facilitated 15-year, fixed-rate mortgages that were essential 

for these tax credits to be attractive to LIHTC investors. However, the 

studies also noted that with no income tax liability to shelter, Fannie Mae 

and Freddie Mac have withdrawn from the LIHTC investment market. 

According to FHFA, it instructed the enterprises to withdraw from the 

LIHTC market. Although it is no longer an active equity investor, Freddie 

Mac officials noted that the enterprise continues to purchase and 

guarantee mortgages that support LIHTC programs. 

 

37Mortgage Finance Working Group’s Multifamily Subcommittee, Center for American 

Progress, A Responsible Market for Rental Housing Finance: Envisioning the Future of 

the U.S. Secondary Market for Multifamily Residential Rental Mortgages (October 2010).

38Mortgage Finance Working Group’s Multifamily Subcommittee, Center for American 

Progress, A Responsible Market for Rental Housing Finance: Envisioning the Future of 

the U.S. Secondary Market for Multifamily Residential Rental Mortgages (October 2010). 
 

Page 43 GAO-12-849 Multifamily Housing Financing

FHFA’s proposed rule on the 2010 and 2011 affordable housing goals, it 

wrote that Fannie Mae and Freddie Mac actually had been doing even 

less to finance what it called legitimate, affordable rental housing since 

conservatorship. The association provided as an example the experience 

of one of its members, a lending consortium whose funds came from a 

pool of 45 investors. One of the enterprises had been an investor since 

1993, but recently had been the only major investor to not renew its 

commitment. According to this enterprise, FHFA has directed it to cease 

making certain types of investments and loans.

In addition, our literature review and interviews indicated that the 

enterprises have played a limited role in financing small multifamily 

properties, which tend to have lower rents than larger properties. 

According to the 2010 American Community Survey, almost one-third of 

renters live in structures with 5 to 49 units (see fig. 19).

Figure 19: Distribution of Rental Units by Building Size (Number of Units), 2010 

Note: The American Community Survey data used do not include unoccupied rental units.

 

Representatives from trade associations, housing policy groups, industry 

researchers, and a consumer advocacy group generally agreed on the 

limited role that Fannie Mae and Freddie Mac played in the small-loan 

market segment. For example, two trade associations stated that 

enterprise financing generally has not flowed outside major metropolitan 
 

Page 44 GAO-12-849 Multifamily Housing Financing

areas, where there is a need for small-loan financing. In its comment 

letter on FHFA’s proposed rule on the 2010 and 2011 affordable housing 

goals, one of these trade associations stated that smaller-sized properties 

that are affordable to low- and moderate-income persons are the most 

underserved segment of the multifamily market, in large part because of 

low levels of enterprise activity in this market segment. 

As previously noted, small loans (those for properties with 5 to 50 units) 

make up a small percentage of the loans that the enterprises have 

purchased.39 According to Fannie Mae’s 2011 activity report, 22,382 of 

the 390,526 multifamily units that Fannie Mae financed (5.7 percent) were 

through small loans. Of these multifamily units, 76 percent were lowincome or very low-income rental units.40

While most studies we reviewed and individuals we interviewed stated 

that the enterprises played an important role in multifamily housing 

finance, two studies stated that private capital should play a larger role. 

The first study concluded that without the enterprises over the past 20 

years, “a fully functioning, private debt financing market for multifamily 

housing would have existed, in the same way that fully private debt 

According to Freddie Mac’s 

2011 activity report, the enterprise’s units financed through small loans

comprised 0.7 percent of the multifamily units it financed (2,173 of 

290,116 units). About 35 percent of these units were low-income or very 

low-income rental units. Although well below the enterprises’ participation 

in the larger property market, officials at FHFA, Fannie Mae, and Freddie 

Mac contend that the enterprises’ small-loan activity levels are noteworthy 

because this segment of the market has been dominated by banks and 

thrifts—institutions that have greater familiarity with local needs. (For 

information on how the size of the loans that the enterprises purchased 

compares with the size of loans financed by other major participants in 

the multifamily housing financing marketplace, see app. IV.)

 

39While the American Community Survey reports on properties with 5 to 49 units as small, 

FHFA and the enterprises define small multifamily loans as those financing properties with

5 to 50 units.

40Low-income rental units are those affordable to households with income below 80 

percent of area median income. Very low-income rental units are those affordable to 

households with incomes below 50 percent of area median income. 
 

Page 45 GAO-12-849 Multifamily Housing Financing

financing markets exist for office, retail, and industrial properties.”41

According to the study, the multifamily market is dependent on the 

enterprises because of a lack of competition among other lenders, 

derived from the enterprises’ unfair pricing advantages. Similarly, the 

second study stated that before the enterprises’ involvement, life 

insurance companies, pension funds, and banks supported a robust 

conventional multifamily lending market.42

In February 2012, FHFA released a strategic plan for the enterprises’ 

single- and multifamily operations during the next phase of 

conservatorship. In the plan, FHFA asked Fannie Mae and Freddie Mac 

to conduct a market analysis of the viability of their multifamily operations 

without government guarantees. FHFA also released a draft strategic 

plan for 2013 through 2017, which includes the strategic plan for 

conservatorship. This plan noted that the enterprises would be working to 

further standardize the process for securitizing mortgages.

According to the study, once 

the enterprises entered the multifamily market, the private sector had an 

increasingly difficult time competing with the enterprises because their 

charter provided them with certain advantages, such as pricing. The 

authors of the first study and other stakeholders we interviewed stated 

that the benefits conferred on Fannie Mae and Freddie Mac by their 

status as government-sponsored entities created a competitive 

advantage over other market participants, temporarily crowding them out 

of the market. 

43

 

41Tom White and Charlie Wilkins, No Federal Guaranty for Multifamily and Other Ideas for 

Multifamily Housing Finance Reform, paper presented at an American Enterprise Institutehosted event entitled “A New Lease on Loans: Ideas for Multifamily Housing Reform” 

(Washington, D.C.: Nov. 16, 2011). 

According to 

Fannie Mae and Freddie Mac officials, both enterprises have begun their 

market analyses and expect to meet FHFA’s deadline of December 31, 

2012. 

42Peter J. Wallison, Alex J. Pollock, and Edward J. Pinto, Taking the Government Out of 

Housing Finance: Principles for Reforming the Housing Finance Market, an American 

Enterprise Institute Policy White Paper (Mar. 24, 2011).

43According to FHFA officials, the focus of this initiative is single-family mortgages. 

Securitization for single-family mortgages has been more standardized than for multifamily 

mortgages, which also has employed a different process. For example, the typical 

multifamily MBS that Fannie Mae issues is backed by a single multifamily loan, while its 

single-family MBS are backed by numerous single-family loans.
 

Page 46 GAO-12-849 Multifamily Housing Financing

Currently, the enterprises compose the largest share of the multifamily 

market as they and other federal entities compose most of the singlefamily market. While markets are expected to eventually recover from the 

financial crisis, the future role of the enterprises is unknown due to a 

number of factors. However, our analysis of multifamily funding activity 

over time provides insight into the role the enterprises have played in the 

marketplace during periods in which the markets were relatively stable. 

For example, prior to the financial crisis, our analysis revealed that the 

enterprises generally financed about 30 percent of multifamily mortgages. 

Beginning in 2010, FHFA implemented the Housing and Economic 

Recovery Act of 2008 (HERA) by making significant changes to the 

housing goal framework, including establishing separate goals for the 

purchases of single- and multifamily mortgages. 

The Safety and Soundness Act required the enterprises to meet annual 

numeric goals for the purchase of mortgages serving targeted groups.44

Specifically, the act established three broad affordable housing goals for 

Fannie Mae and Freddie Mac: (1) a broad low- and moderate-income 

goal for families earning less than the area median income (AMI); (2) a 

geographically targeted goal for housing located in underserved areas, 

such as central cities and rural areas; and (3) a special affordable 

housing goal, which targets housing that is affordable to very low-income 

families and low-income families living in low-income areas. In HUD’s first 

rulemaking on the affordable housing goals, it defined underserved areas 

as census tracts with median income at or below 90 percent of AMI in 

metropolitan areas and 95 percent of AMI in nonmetropolitan areas, or 

high-minority areas (metropolitan census tracts in which at least 30 

percent of households are minority and the tract median income does not 

exceed 120 percent of AMI).45

 

44Federal Housing Enterprises Financial Safety and Soundness Act of 1992, Pub. L. No. 

102-550, §§ 1331-1334. 

The special affordable goal targeted 

45A similar definition, based on counties, was employed for high-minority areas in 

nonmetropolitan areas. The income definitions were revised over time. For example, for 

2005 through 2008 HUD revised the underserved areas goal to target households residing 

in (1) census tracts with median income at or below 80 percent of AMI in metropolitan 

areas, or (2) high-minority areas with tract median income at no more than 100 percent of 

AMI. 

Enterprises’ Multifamily 

Activities Are Important to 

Meeting Affordable 

Housing Goal 

Requirements

HUD and FHFA Roles and 

Responsibilities
 

Page 47 GAO-12-849 Multifamily Housing Financing

borrowers or renters earning no more than 60 percent of AMI or earning 

no more than 80 percent of AMI and residing in census tracts with median 

income at or below 80 percent of AMI. 

The Safety and Soundness Act required HUD to consider several factors 

in establishing these housing goals, including: (1) national housing needs; 

(2) economic, housing, and demographic conditions; (3) past 

performance on each goal; (4) the size of the corresponding primary 

mortgage market; (5) the ability of the enterprises to lead the industry, 

and (6) the need to maintain the sound financial condition of the 

enterprises. For the period 1993 through 2008, HUD considered past 

performance and the size of the corresponding primary market as the two 

primary factors when setting the goals.46

The enterprises could purchase both single- and multifamily mortgages to 

satisfy these goals. Starting in 1996, HUD established a dollar-based 

special affordable multifamily subgoal related to purchases of multifamily 

mortgages for properties affordable to very low-income tenants (no more 

than 60 percent of AMI) or in low-income neighborhoods and affordable to 

low-income tenants. See figure 20 for information on changes made to 

the affordable housing goals since they were first set in 1992.

 

46According to a November 2010 paper by John C. Weicher (former Assistant Secretary 

for Housing at HUD from 2001 through 2005), the goals that HUD set did not ask the 

enterprises to lead the market; rather, the targets were consistently set so that they could 

be met. See Weicher, The Affordable Housing Goals, Homeownership and Risk: Some 

Lessons from Past Efforts to Regulate the GSEs, paper presented at a Federal Reserve 

Bank of St. Louis conference entitled “The Past, Present, and Future of the GovernmentSponsored Enterprises” (St. Louis, Mo.: Nov. 17, 2010). 
 

Page 48 GAO-12-849 Multifamily Housing Financing

Figure 20: Enterprises’ Affordable Housing Goals Timeline, 1992-2012

 

HUD oversaw the enterprises’ compliance with the housing goals through 

2008. On July 30, 2008, HERA transferred the housing goal oversight 

function to FHFA.47

 

47See Pub. L. No. 110-289, Sec. 1128 (12 U.S.C. 4561). 

The Safety and Soundness Act, as amended by 

HERA, requires FHFA to consider the following when setting multifamily 

goals: national multifamily mortgage credit needs and the ability of the 

enterprises in making mortgage credit available to provide additional 

liquidity and stability for the multifamily mortgage market; the performance 

and effort of the enterprises in making mortgage credit available for 

multifamily housing in previous years; the size of the multifamily mortgage 

market for housing affordable to low-income and very low-income 
 

Page 49 GAO-12-849 Multifamily Housing Financing

families; the ability of the enterprises to lead the market in making 

multifamily mortgage credit available; the availability of public subsidies; 

and the need to maintain the sound financial conditions of the 

enterprises.48

In establishing affordable housing goals under HERA, FHFA focused 

more on the role of the enterprises in the multifamily market given current 

market conditions and competitors’ roles and less on past performance. 

In August 2009, FHFA issued a final rule that kept many of the existing 

housing goals provisions, but revised the levels of the existing affordable 

housing goals downward in light of current market conditions.

 

49 Beginning 

in 2010, FHFA, implementing HERA, made significant changes to the 

goals framework, such as separating the goals for multifamily and singlefamily mortgage purchases.50 In its final rule on the affordable housing 

goals for 2010 and 2011, the agency also redefined the goal targets to 

reach lower-income groups and required the enterprises to report on their 

acquisition of mortgages involving low-income units in small (5 to 50 unit) 

multifamily properties.51 Further, FHFA prohibited the enterprises from 

crediting purchases of private-label securities, including CMBS, toward

housing goals. On June 11, 2012, FHFA issued a proposed rule on the 

affordable housing goals for 2012 through 2014.52

The Safety and Soundness Act (as amended by HERA) also requires 

FHFA’s director to annually determine the performance of each enterprise 

in meeting the housing goals, and determine the feasibility (given current 

market conditions) of any housing goals and subgoals that an enterprise 

failed to meet.

FHFA is proposing to 

continue the existing structure, with revised single-family and multifamily 

housing goal benchmark levels for 2012, 2013, and 2014.

53

 

48See Section 1333(a)(4) of the Safety and Soundness Act, as amended by HERA (12 

U.S.C. 4563(a)(4)). 

The enterprises submit quarterly reports to FHFA on goal 

49See 74 Fed. Reg. 39873 (Aug. 10, 2009).

50The new affordable housing goals include four single-family goals and one single-family 

subgoal as well as one multifamily goal and one multifamily subgoal. 

51See 75 Fed. Reg. 55892 (September 14, 2010).

52See 77 Fed. Reg. 34263 (June 11, 2012) (proposed rule).

53See 12 U.S.C. §§ 4544, 4566. 
 

Page 50 GAO-12-849 Multifamily Housing Financing

performance that include loan-level data, as well as an annual report at 

the end of each year.54 FHFA uses these data to determine official goal 

performance. If an enterprise fails to attain a goal, the FHFA director may 

require submission of a housing plan describing the specific action that 

the enterprise will take to achieve the goal for the next year.55

The enterprises generally have met their affordable housing goals. 

According to HUD documents, the enterprises generally exceeded their 

affordable housing goals from 1993 through 2000, with their performance 

generally increasing during that time period.56 Official reports on goal 

performance for 2001 through 2009 show that Fannie Mae and Freddie 

Mac exceeded their goals from 2001 through 2007, but failed to meet 

some of the goals in 2008 and 2009 (see table 3). FHFA determined that 

the two goals both enterprises failed to meet in 2008 (the low- and 

moderate-income and special affordable goals) were infeasible due to 

structural changes in the market from 2006 through 2008, which were not 

anticipated in 2004 when HUD established the goals. Specifically, FHFA 

took into consideration such factors as tightened underwriting standards 

in the mortgage industry, the decreased availability of private mortgage 

insurance in the primary market, the increase in the share of single-family 

mortgages insured by FHA, and the fall in the issuance of goalsqualifying, private-label securities. Freddie Mac also did not meet the 

underserved areas goal in 2008. Although FHFA determined that the 

market conditions that made the other two goals infeasible made meeting 

the underserved areas goal more difficult for Freddie Mac, it did not 

declare this goal to be infeasible for Freddie Mac. But based on Freddie 

Mac's financial condition in 2008, FHFA did not require Freddie Mac to 

submit a housing plan.

 

54See 12 C.F.R. §§ 1282.62 and 1282.63. 

55See 12 U.S.C. § 4566. 

56See, for example, HUD, Office of Policy Development and Research, Summary of U.S. 

Housing Market Conditions (Washington, D.C.: Summer 1998). We relied on these reports 

to determine whether the enterprises met their goals in 1993 through 2000 because FHFA 

was unable to provide official annual reports from HUD showing each year’s goals and the 

enterprises’ performance relative to their goals.

Enterprises’ Goal Performance
 

Page 51 GAO-12-849 Multifamily Housing Financing

Table 3: Enterprises’ Goal Targets and Performance, 2001-2009 

Year

Low- and moderate-income goal Special affordable goal Underserved areas goal

Goal (%)

Fannie 

Mae

Freddie 

Mac Goal (%)

Fannie 

Mae

Freddie 

Mac Goal (%)

Fannie 

Mae

Freddie 

Mac

2001 50 51.5 53.2 20 21.6 22.6 31 32.6 31.7

2002 50 51.8 50.3 20 21.4 20.5 31 32.8 31

2003 50 52.3 51.2 20 21.2 21.4 31 32.1 32.7

2004 50 53.4 51.6 20 23.6 22.7 31 33.5 32.3

2005 52 55.1 54 22 26.3 24.3 37 41.4 42.3

2006 53 56.9 55.9 23 27.8 26.4 38 43.6 42.7

2007 55 55.5 56.1 25 26.8 25.8 38 43.4 43.1

2008a 56 53.7 51.5 27 26.4 23.1 39 39.4 37.7

2009b 43 47.6 44.7 18 20.7 17.7 32 28.8 26.8

Source: FHFA.

a

For 2008, FHFA declared the low- and moderate-income and special affordable goals infeasible.

b

For 2009, FHFA determined that the underserved areas goal was not feasible. 

FHFA also declared that the underserved areas goal that both enterprises 

failed to meet in 2009 was infeasible. In making this determination, FHFA 

considered the same factors it took into account the previous year. 

Freddie Mac also did not meet the special affordable goal in 2009. FHFA 

determined that this goal was feasible for Freddie Mac, but in light of the 

near achievement of the goal, did not require a housing plan.

As noted previously, both enterprises also had to meet a special 

affordable multifamily subgoal in 2001 through 2009. Fannie Mae and 

Freddie Mac exceeded this subgoal in each year except for 2009 (see 

table 4). FHFA declared each enterprise’s subgoal for that year to be 

infeasible after considering the collapse of the CMBS market and the 

financial condition of the enterprises.57

 

57According to FHFA officials, Freddie Mac, and to a lesser extent Fannie Mae, depended 

heavily on CMBS purchases to attain the special affordable multifamily subgoal from 2006 

to 2008. 
 

Page 52 GAO-12-849 Multifamily Housing Financing

Table 4: Enterprises’ Target and Performance for Special Affordable Multifamily 

Subgoal, 2001-2009 

Year

Fannie Mae Freddie Mac

Goal (dollars 

in billions)

Performance

(dollars in 

billions)

Goal (dollars

in billions)

Performance

(dollars in 

billions)

2001 $2.85 $7.36 $2.11 $4.65

2002 2.85 7.57 2.11 5.22

2003 2.85 12.23 2.11 8.79

2004 2.85 7.32 2.11 7.77

2005 5.49 10.39 3.92 12.35

2006 5.49 13.31 3.92 13.58 

2007 5.49 19.84 3.92 15.12

2008 5.49 13.31 3.92 7.49

2009 6.56 6.42 4.60 3.69

Source: FHFA. 

When the single-family and multifamily goals were combined, the 

enterprises’ multifamily activities were “goal rich,” meaning that 

purchasing multifamily mortgages had a disproportionate importance for 

the housing goals because most multifamily rental units are occupied by 

households with low and moderate incomes. For example, in 2008 the 

enterprises’ multifamily business, which represented 4.5 percent of the 

enterprises’ total unpaid principal balance financed, accounted for 32 

percent of the units that met the low- and moderate-income goal, 27 

percent of the units that met the underserved areas goal, and 39 percent 

of the units that met the special affordable goal (see table 5).58

 

58To determine the enterprises’ total business and multifamily business, we considered

purchases of mortgages and mortgage-related securities (MBS and mortgage revenue 

bonds). 
 

Page 53 GAO-12-849 Multifamily Housing Financing

Table 5: Multifamily Contributions to Enterprises’ Affordable Housing Goals, 2001-

2009 

Year

Percentage of 

enterprises’ total 

business that was 

multifamily business

Percentage of units that qualified for each goal 

that were financed by multifamily mortgages

Low- and 

moderateincome goal

Underserved 

areas goal

Special 

affordable goal

2001 2.0% 23% 19% 32%

2002 1.5 18 15 24

2003 1.7 22 22 29

2004 3.0 21 17 29

2005 3.6 22 18 31

2006 4.8 27 22 38

2007 7.2 33 27 41

2008 4.5 32 27 39

2009 2.8 18 17 22

Source: GAO analysis of FHFA data

For 2010, FHFA established two specific multifamily goals. The lowincome multifamily goal was targeted at rental units in multifamily 

properties affordable to families with incomes no greater than 80 percent 

of AMI, and the very low-income multifamily subgoal was for units 

affordable to families with incomes no greater than 50 percent of AMI. 

Both enterprises’ performance levels exceeded the two multifamily goal 

targets in 2010 and 2011 (see table 6).
 

Page 54 GAO-12-849 Multifamily Housing Financing

Table 6: Enterprises’ Multifamily Goal Targets and Performance, 2010-2011

Year

Low-income multifamily goal (units) Very low-income multifamily goal (units)

Fannie Mae Freddie Mac Fannie Mae Freddie Mac

Goal Performance Goal Performance Goal Performance Goal Performance

2010 177,750 214,997 161,250 161,500 42,750 53,908 21,000 29,656

2011 177,750 301,224 161,250 229,001 42,750 84,244 21,000 35,471

Sources: FHFA, Fannie Mae, and Freddie Mac.

Note: The numbers for 2011 are preliminary figures reported by Fannie Mae and Freddie Mac in their 

March 2012 activity reports. FHFA has yet to publish the official numbers for 2011.

The enterprises have purchased multifamily loans that have underwriting 

standards and loan performance that compared favorably with those of 

other market participants. For example, from 2005 through 2010, the 

enterprises experienced lower default rates than the other major 

mortgage capital sources, with the exception of life insurance companies. 

To help offset some of their credit risks and increase the supply of 

affordable multifamily housing, the enterprises have risk-sharing 

programs with FHA and RHS.59 However, these programs involve 

relatively few loans. OFHEO and FHFA, through their examination and 

oversight of the enterprises, identified a number of credit risk deficiencies 

since 2006. For example, they found deficiencies in Fannie Mae’s 

delegated underwriting and servicing program, its risk-management 

reorganization, and information systems; and Freddie Mac’s management 

of its lower-performing assets. Both enterprises are taking steps to 

address these deficiencies.

 

59These programs are in addition to the enterprises’ sharing of risk with lenders and 

investors, as discussed previously in the background section of this report. 

Enterprises’ 

Purchased 

Multifamily Loans 

Have Performed

Relatively Well, but 

Regulators Identified 

Issues with Credit 

Risk Management
 

Page 55 GAO-12-849 Multifamily Housing Financing

Based on underwriting standards and loan performance, the loans the 

enterprises purchased generally performed as well as and oftentimes 

better than other major sources of financing for multifamily housing. The 

major sources include life insurance companies, CMBS lenders, banks 

and thrifts, and FHA and RHS lenders.60 We compared the enterprises’ 

credit standards to those of CMBS lenders and life insurance companies, 

two major participants in the multifamily housing financing marketplace.61

From 2005 through 2011, the enterprises’ underwriting standards—as 

measured by median debt-service coverage and LTV ratios—were 

generally stricter than CMBS lenders.62

 

60We also obtained data on credit standards and loan performance from a small number of 

participants that provide multifamily affordable housing loans: state and local HFAs and 

nonprofit loan consortiums (funded by a pool of local banks and thrifts). 

Higher debt-service coverage 

ratios and lower LTV ratios indicate lower risk. For example, from 2005 

through 2011, the enterprises’ median debt-service coverage ratios were 

always higher than those of CMBS lenders, with the exception of Fannie 

Mae in 2007 (see table 7). Also, over this period, Fannie Mae’s LTV ratios 

were lower than those of CMBS lenders for every year except 2010, while 

Freddie Mac’s LTV ratios were lower than those of CMBS lenders in 3 

years. When compared with life insurance company ratios, Fannie Mae’s 

median debt-service coverage ratios were lower for every year from 2005 

through 2011, except for 2009. In contrast, Freddie Mac had higher 

median debt-service coverage ratios than life insurance companies for 3 

of the 7 years. In addition, Fannie Mae had lower LTV ratios than life 

insurance companies for all years except 2008 and 2011, while Freddie 

Mac had higher LTV ratios than life insurance companies in all years from 

2005 through 2011. 

61Aggregate data on the credit standards of banks and thrifts and FHA and RHS lenders

are not readily available. 

62The debt-service coverage ratio is an indicator of future credit performance for 

multifamily loans; the ratio estimates a multifamily borrower’s ability to service its 

mortgage obligation using the secured property’s cash flow, after deducting nonmortgage 

expenses from income. The higher the ratio, the more likely a multifamily borrower will be 

able to continue servicing its mortgage obligation. The LTV ratio is the ratio of the unpaid 

principal amount of a mortgage loan to the value of the property that serves as collateral 

for the loan, expressed as a percentage. Loans with high LTV ratios generally tend to 

have a higher risk of default and, if a default occurs, a greater risk that the amount of the 

gross loss will be high compared to loans with lower LTV ratios.

Enterprises’ Multifamily 

Underwriting Standards 

and Serious Delinquency 

Rates Compared Favorably 

with Those of Other 

Sources of Multifamily 

Credit
 

Page 56 GAO-12-849 Multifamily Housing Financing

Table 7: Median Debt-Service Coverage and LTV Ratios for Multifamily Loans Financed by the Enterprises, CMBS Lenders, 

and Life Insurance Companies, 2005-2011

Acquisition 

or 

origination 

year 

Median debt-service coverage ratio Median LTV ratio

Fannie Mae

Freddie 

Mac

CMBS

lenders

Life insurance 

companies

Fannie 

Mae

Freddie 

Mac

CMBS

lenders

Life insurance 

companies

2005 1.40 1.55 1.33 1.55 62.00 75.00 74.80 69.53

2006 1.35 1.48 1.25 1.37 60.00 70.91 73.90 68.49

2007 1.22 1.39 1.25 1.36 55.00 72.00 74.87 67.48

2008 1.35 1.45 1.22 1.57 64.00 71.84 75.00 59.59

2009 1.36 1.57 N/A 1.34 65.00 70.00 N/A 66.75

2010 1.44 1.55 1.41 1.56 65.00 71.69 63.94 66.32

2011 1.42 1.63 1.40 1.66 65.00 70.23 69.60 63.65

Sources: GAO analysis of Fannie Mae and Freddie Mac data; ACLI; and Trepp.

Note: For Fannie Mae and Freddie Mac, the year represents the year the loan was acquired. For 

CMBS lenders and life insurance companies, the year is the year the loan was originated. CMBS 

lenders did not originate any multifamily loans in 2009. According to ACLI, the vast majority of loans 

that life insurance companies originate are fixed-interest amortizing loans. It noted that other types of 

multifamily loans may have better debt-service coverage and LTV ratios even though they may be 

riskier debt. 

We also obtained data on credit standards from six HFAs and three loan 

consortiums. The median debt-service coverage ratios for five of the 

HFAs were generally lower than those of the enterprises.63 For example, 

from 2005 through 2011, the median debt-service coverage ratios for the 

five HFAs ranged from 0.92 to 1.72. Likewise, the median debt-service 

coverage ratios for the three loan consortiums were lower than the ratios 

for both of the enterprises over this same period. When we compared the 

median LTV ratios of the six HFAs and the enterprises, we found that 

three HFAs generally had lower LTV ratios than both of the enterprises 

for all years from 2005 through 2011, two had LTV ratios that varied 

compared with those of the enterprises, and one HFA had LTV ratios that 

were higher than the enterprises. Data from two of the loan consortiums

showed that one had median LTV ratios that were lower than those of 

both enterprises for all years from 2005 through 2011.

64

 

63One of the HFAs in our sample did not provide data on debt-service coverage ratios.

The second had 

ratios that were higher than Fannie Mae, but lower than Freddie Mac in 3 

64The third loan consortium in our sample did not provide data on median LTV ratios.
 

Page 57 GAO-12-849 Multifamily Housing Financing

of the 7 years. For more information on the credit standards of these 

HFAs and loan consortiums, see appendix V. 

When comparing the performance of multifamily loans financed by Fannie 

Mae and Freddie Mac with those financed by other major sources of 

multifamily credit, we were not always able to make direct comparisons 

because market participants track delinquencies in different ways. We 

generally found that from 2005 through 2010, the enterprises experienced 

lower default rates than the other major mortgage capital sources, with 

the exception of life insurance companies in some cases. For example, 

as of December 31, 2011, Fannie Mae’s serious delinquency rates (loans 

60 days or more delinquent) for only those loans acquired or guaranteed 

in 2005 through 2007 ranged from 0.66 to 0.89 percent (see table 8). As 

of the same date, Freddie Mac’s serious delinquency rates for loans 

acquired or guaranteed during this period ranged from 0.20 to 0.74 

percent. These rates are considerably lower than the serious delinquency 

rates for loans originated by CMBS lenders in 2005 through 2007, which 

peaked at about 24 percent for loans originated in 2007.65 Starting in 

2008, the serious delinquency rates for loans originated each year by 

CMBS lenders dropped considerably. FHA’s serious delinquency rates for 

loans originated in 2005 through 2010 were much higher than either of 

the enterprises for three of the six years. FHA’s highest delinquency rate 

was for 2009, with loans originated that year having a serious 

delinquency rate of more than 5 percent, compared to a negligible 

delinquency rate for the enterprises’ loans acquired that year.

 

65According to Trepp, these high delinquency rates were mainly attributable to a few large 

loans in New York City involving rent-controlled properties and several large developers in 

other parts of the country that had cash flow problems that largely have been resolved.

Additionally, CMBS lenders relaxed their credit standards before the financial crisis, 

according to Trepp.
 

Page 58 GAO-12-849 Multifamily Housing Financing

Table 8: Percentage of Enterprise, CMBS, and FHA Multifamily Loans Financed in 

2005-2010 That Were Seriously Delinquent as of December 31, 2011 

Acquisition or 

origination year Fannie Mae Freddie Mac CMBS lenders FHA lenders

2005 0.73% 0.20% 5.60% 1.19%

2006 0.66 0.25 13.63 0.66

2007 0.89 0.74 23.94 0.54

2008 1.12 0.09 4.68 2.74

2009 0.05 0.00 N/A 5.15

2010 0.04 0.00 0.00 0.02

Sources: Fannie Mae, Freddie Mac, Trepp, and FHA. 

Note: Fannie Mae, Freddie Mac, and CMBS and FHA lenders consider loans to be seriously 

delinquent when they are 60 days or more delinquent. For Fannie Mae and Freddie Mac, the year 

represents the year the loan was acquired. For CMBS and FHA lenders, the year is the year the loan 

was originated. CMBS lenders did not originate any multifamily loans in 2009.

The enterprises also performed better than commercial banks and thrifts 

insured by the Federal Deposit Insurance Corporation (FDIC). FDIC’s 

Quarterly Banking Profile provides information on the multifamily loan 

performance of insured commercial banks and thrifts based on their total 

outstanding portfolios at the end of each quarter. Specifically, the profile 

provides data on loans that are 90 days or more delinquent.66 As shown 

in table 9, with the exception of 2005 for Fannie Mae, for the period 2005 

through 2011 the percentage of the enterprises’ multifamily loans that 

were delinquent for 60 days or more was always lower than the 

percentage of bank and thrift loans that were delinquent for 90 days or 

more. This was the case even though the 60-day delinquency rate is a 

stricter measure of delinquency than the 90-day rate. 

 

66Loans that were 90 days or more delinquent include loans in nonaccrual status, which 

are nonperforming loans that are not generating the stated interest rate because of 

nonpayment from the borrower, typically due to financial difficulties. 
 

Page 59 GAO-12-849 Multifamily Housing Financing

Table 9: Percentage of Outstanding Unpaid Principal Balances of Multifamily Loans 

That Were Seriously Delinquent for the Enterprises and FDIC Banks, Year End 2005-

2011

Year end 

60 days or more delinquent

90 days or more 

delinquenta

Fannie Mae Freddie Mac 

FDIC-insured 

institutions 

2005 0.32% 0.00% 0.25%

2006 0.08 0.06 0.53

2007 0.08 0.02 0.76

2008 0.29 0.03 1.77

2009 0.62 0.20 4.43

2010 0.70 0.26 3.78

2011 0.58 0.22 2.53

Sources: GAO analysis of Fannie Mae and Freddie Mac data, and FDIC data. 

Note: All of the percentages in the table are based on unpaid principal balance.

a

Represents the percentage of loans that are past due 90 days or more or that are in nonaccrual 

status. 

The life insurance companies generally performed better than Fannie 

Mae, while Freddie Mac’s performance was generally comparable to that 

of life insurance companies. As shown in table 10, for life insurance 

companies, the percentage of unpaid principal balance on multifamily 

loans that was 60 days or more delinquent ranged from 0 to 0.21 percent 

from 2005 through 2011. Fannie Mae had higher multifamily serious 

delinquency rates for all the years in the period, while Freddie Mac had 

rates closer to those of life insurance companies until 2010 and 2011.67 

 

67According to Freddie Mac officials, life insurance companies tend to actively sell loans 

before they become delinquent. We confirmed with an ACLI official that insurance 

companies actively manage their portfolios of commercial mortgages, which sometimes 

involves selling potential problem loans and delinquent mortgages in order to minimize 

losses.
 

Page 60 GAO-12-849 Multifamily Housing Financing

Table 10: Percentage of Outstanding Unpaid Principal Balances of Multifamily 

Loans That Were Seriously Delinquent for the Enterprises and Life Insurance 

Companies, Year End 2005-2011

Year end

60 days or more delinquent

Fannie Mae Freddie Mac 

Life insurance 

companies

2005 0.32% 0.00% 0.02%

2006 0.08 0.06 0.02

2007 0.08 0.02 0.00

2008 0.29 0.03 0.02

2009 0.62 0.20 0.21

2010 0.70 0.26 0.01

2011 0.58 0.22 0.13

Sources: GAO analysis of Fannie Mae and Freddie Mac data, and ACLI.

Note: All of the percentages in the table are based on unpaid principal balance.

Smaller participants in the multifamily marketplace generally experienced 

fewer delinquencies. From 2005 through 2011, only 1 of 401 loans 

guaranteed or financed by RHS was delinquent for 60 days or more. 

Further, only one of the six HFAs and one of the three loan consortiums 

reported delinquencies (60 days or more delinquent). Both reported 

delinquencies in 2005 and 2006. 

Fannie Mae and Freddie Mac have entered into risk-sharing agreements 

with FHA and RHS to increase the supply of affordable multifamily 

housing and help offset some of their credit risk, but these programs have 

involved relatively few loans. The enterprises participate in two risksharing programs with FHA. The first of these programs, known as the 

“standard” FHA risk-sharing program, started in 1994. Under the program, 

the enterprises acquire loans for eligible affordable multifamily housing 

projects (either new construction or rehabilitation).68

 

68Affordable multifamily housing projects are those in which (1) 20 percent or more of the 

rental units are both rent-restricted and occupied by families whose incomes are 50 

percent or less of AMI, with adjustments for household size, or (2) 40 percent (25 percent 

in New York City) or more of the rental units are both rent-restricted and occupied by 

families whose incomes are 60 percent or less of AMI, with adjustments for household 

size.

The loans generally 

are not to exceed $50 million and the term of the mortgage is for 15 years 

Enterprises’ Participation 

in Multifamily Risk-Sharing 

Programs Has Been 

Limited
 

Page 61 GAO-12-849 Multifamily Housing Financing

or more. In the event of a loss on a loan, the enterprises assume the 

primary risk of loss and FHA reimburses them for 50 percent of the loss. 

In exchange for reimbursing the enterprises, FHA charges them an 

annual risk-sharing premium of 25 basis points (.25 percent) of the 

average unpaid principal balance. The second of these programs, the 

Green Refinance Plus program, was established in 2011 to preserve and 

improve existing affordable housing by providing financing to renovate or 

retrofit properties.

69 No less than 5 percent of the principal balance must 

be used for renovation or energy or water retrofitting, and the term of the 

loans must be for no less than 10 years. Under the program, HUD 

assumes the first loss in an amount equal to 4.35 percent of the unpaid 

principal balance on a defaulted loan plus 50 percent of the balance of 

the loss on an equal basis with the enterprises. FHA charges the 

enterprises an annual risk-sharing premium of 40 basis points (.40 

percent) of the average unpaid principal balance for loans with terms of 

15 years or more.

70

Since the inception of the risk-sharing programs with FHA, the enterprises 

have participated in a small number of risk-sharing loans relative to their 

overall multifamily housing business. As shown in table 11, from 1995 

through 2011, Fannie Mae collaborated with FHA on 157 loans with 

unpaid principal balances of about $750 million. Over this period, Fannie 

Mae purchased or guaranteed more than 95,000 loans with unpaid 

principal balances of $373 billion. According to Fannie Mae, the decline in 

the use of this program in recent years is due to the drop off in new 

LIHTC financings after Fannie Mae and Freddie Mac ceased investing in 

projects eligible for LIHTCs. As of July 2012, Fannie Mae lenders had 

closed two Green mortgage loans with unpaid principal balances of $23 

million.

71

 

69According to Fannie Mae, the enterprise will decrease its standard debt-service 

coverage requirement by 5 basis points (for example, from 1.20 to 1.15) and increase its 

standard LTV ratio (for example, from 80 to 85 percent), thereby generating between 4 

and 5 percent additional proceeds to cover some of the costs of the renovations or 

retrofitting. 

From 2005 through 2011, Freddie Mac collaborated with FHA on 

59 loans or credit-enhanced bonds with unpaid principal balances of $298

70If the term of the loan is 10-15 years and there is no amortization reserve, the risksharing premium is 50 basis points (.50 percent).

71According to Fannie Mae officials, HUD has been considering changes that Fannie Mae 

suggested to the execution of this program that would make it more attractive to the 

owners of existing affordable multifamily properties.
 

Page 62 GAO-12-849 Multifamily Housing Financing

million. Over this period, Freddie Mac purchased or guaranteed more 

than 9,000 loans with unpaid principal balances of $129 billion.

Table 11: Enterprises’ Multifamily Risk-Sharing Loans with FHA, 1995-2011

Acquisition 

year

Fannie Mae Freddie Mac

Unpaid 

principal 

balance 

(dollars in 

millions)

Number of 

loans

Unpaid 

principal 

balance 

(dollars in 

millions)

Number of 

loans

1995 $8 1 not available not available

1996 8 2 not available not available

1997 12 4 not available not available

1998 28 7 not available not available

1999 33 7 not available not available

2000 41 8 not available not available

2001 43 7 not available not available

2002 111 24 not available not available

2003 82 20 not available not available

2004 80 24 not available not available

2005 63 21 $42 8 

2006 45 12 77 15

2007 12 3 3 1 

2008 16 5 2 1 

2009 5 2 67 15

2010 8 2 24 7 

2011 157 8 83 12

Total $752 157 $298 59

Sources: GAO analysis of Fannie Mae data, and Freddie Mac.

Note: Fannie Mae’s data only represent loans that are currently on the books. Freddie Mac’s data 

represent loans and credit-enhanced bonds with HUD/FHA risk sharing. 

The enterprises also have entered into risk-sharing agreements with 

RHS, but to a lesser extent than with FHA. Under the enterprises’ risksharing agreement with the RHS loan guarantee program (known as 538 

loans), RHS will guarantee up to 90 percent of the loan. According to 

RHS, the only risk to the enterprises would be due to nonperformance by 

the lender. From 2004 through 2011, Fannie Mae purchased and 

securitized four loans under the RHS program, with unpaid principal 

balances of more than $7 million. From 2001 through 2011, Freddie Mac 
 

Page 63 GAO-12-849 Multifamily Housing Financing

purchased and securitized three loans or bonds with RHS, with unpaid 

principal balances of $6 million as of the end of 2011. 

As noted previously, the enterprises also have supported state and local 

HFAs by providing credit enhancements to tax-exempt bonds used to 

finance affordable multifamily housing. We interviewed selected state and 

local HFAs and in general, they viewed the enterprises as important 

players in providing liquidity for affordable multifamily properties. For 

example, officials from a large local HFA told us that the enterprises have 

played a critical role in providing liquidity and long-term credit 

enhancement to affordable and market-rate developments. According to 

an official from a small state HFA, before 2008 Fannie Mae was an active 

and highly valued buyer of their small tax-exempt private activity bonds. 

The official added that the ability to sell bonds under $5 million on a direct 

placement basis to Fannie Mae was extremely helpful and has been 

missed. Allowing Fannie Mae and Freddie Mac to reenter the bond 

market with private placements would be a significant benefit, and would 

allow the HFA to provide reliable and dependable financing options to 

their multifamily affordable housing projects, according to this HFA

official. The enterprises have also participated in two temporary Treasury 

HFA initiatives: (1) the Temporary Credit and Liquidity Facilities (TCLF) 

program and (2) the New Issue Bond Program (NIBP). TCLF, which

provides replacement credit enhancement and liquidity support to 

outstanding HFA variable-rate demand bonds, is set to expire in 2015. 

The multifamily NIBP was established to facilitate the purchase of newly 

issued HFA bonds, the proceeds of which would be used to finance 

multifamily projects under each participating HFA’s program. In general, 

Treasury sets the pricing parameters and agrees to take the first loss of 

principal up to 35 percent. The enterprises participate in the program on a 

50-50 loss-sharing basis with each other after the top loss coverage by

Treasury.

From 2006 through 2011, FHFA and its predecessor, OFHEO, identified 

deficiencies in management of credit risk at the enterprises. FHFA 

oversees the enterprises’ credit risk management through on-site 

examinations and off-site monitoring. As part of its annual on-site 

examination of the safety and soundness of the enterprises, FHFA 

assesses their enterprise risk, which includes credit, market, and 

Regulators Have Identified 

a Number of Deficiencies 

in Multifamily Credit Risk 

Management
 

Page 64 GAO-12-849 Multifamily Housing Financing

operational risk.72 The written report that FHFA submits to Congress by 

June 15 of each year describes the financial safety and soundness of 

each enterprise, including the results and conclusions from annual 

examinations.73 FHFA also can conduct targeted examinations, which are 

in-depth, focused evaluations of a specific risk or risk-management 

system. Throughout the year, FHFA conducts ongoing supervision of the 

enterprises that includes on-site and off-site monitoring and analyzing of

each enterprise’s overall business profile, including trends or emerging 

risks. FHFA’s Division of Enterprise Regulation prepares quarterly risk 

assessments that inform an Interim Supervisory Assessment Letter, 

which provides FHFA’s view of the condition of the enterprise midway 

through the examination cycle. FHFA documents deficiencies identified in 

examinations or ongoing supervision in a conclusion letter that 

communicates findings, conclusions, and the assigned supervisory 

rating.74

Since 2006, OFHEO and FHFA have identified a number of deficiencies 

with Fannie Mae’s management of multifamily credit risk, including 

several weaknesses in oversight of its DUS program.

FHFA is to follow up on deficiencies to ensure that the 

enterprise’s response is appropriate, timely, and effective. 

75

 

72These annual examinations are required by Section 1317 of the Safety and Soundness 

Act as amended (12 U.S.C. § 4517). Credit risk arises from an obligor’s failure to meet the 

term of any financial contract with the enterprise or other failure to fulfill a financial 

commitment. Credit risk is found in activities in which success depends on counterparty, 

issuer, or borrower performance. The risk arises any time enterprise funds are extended, 

committed, invested, or otherwise exposed through actual or implied contractual 

agreements.

Specifically, in 

OFHEO’s 2006 Annual Report to Congress, the agency reported that 

Fannie Mae’s underwriting standards needed updating because of the 

volume of waivers granted to DUS lenders. According to OFHEO, the 

high waiver rate was indicative of a policy that was too restrictive, lending 

73These annual reports are required by Section 1319B of the Safety and Soundness Act, 

as amended (12 U.S.C. § 4521).

74The supervisory rating in the conclusion letter describes how well risks are identified, 

measured, monitored, controlled, and managed. The rating uses the following terms: no or 

minimal concerns, limited concerns, significant concerns, and critical concerns.

75We reviewed OFHEO’s annual reports to Congress from 1997 through 2008. OFHEO 

reported deficiencies in Fannie Mae’s multifamily activities in 2006, 2007, and 2008. While 

OFHEO and FHFA’s annual reports to Congress are public documents, the results of 

individual FHFA reviews are confidential. Therefore, we limit our discussions of the 

findings to a summary.

Fannie Mae’s Multifamily 

Credit Risk Challenges 
 

Page 65 GAO-12-849 Multifamily Housing Financing

practices that were too liberal, or a policy that was not current relative to 

market conditions. And while Fannie Mae authorized DUS lenders to 

review and approve waivers, the enterprise had not established a strong 

and comprehensive quality control process. In 2011, FHFA 

communicated supervisory concerns related to Fannie Mae’s DUS 

program. Fannie Mae reported that it was taking several steps to address 

these deficiencies, including training its credit underwriting staff, 

conducting due diligence and credit analysis for DUS transactions, and 

expanding its monitoring of multiple loans with the same entity. FHFA 

noted that the steps Fannie Mae planned to take appeared reasonable 

but indicated that the enterprise must show that it had implemented these 

changes and that they could be sustained.

In addition to deficiencies in the DUS program, OFHEO and FHFA 

identified deficiencies with Fannie Mae’s multifamily quality control 

function, asset management (that is, how it manages loans it acquires), 

underwriting practices, and information systems supporting credit risk 

management:

• OFHEO reported in 2006 that Fannie Mae faced deficiencies with its 

quality control function because Fannie Mae’s oversight focused on 

reviewing documents rather than analyzing and assessing credit 

information. OFHEO noted that credit information was incomplete or 

not readily available. In 2007, OFHEO reported that the multifamily 

quality-control process was improved and expanded to provide better 

coverage of multifamily loans.

• In 2008, OFHEO reported that Fannie Mae had begun to address 

deficiencies in asset management. Further, in 2010 FHFA reported 

that Fannie Mae was identifying problem assets earlier, developing 

workout strategies for problem loans, and managing delinquencies 

and foreclosed properties to improve the amount recovered on sales 

of property in markets and minimize losses.

• In 2011, FHFA found that Fannie Mae needed to improve its riskmanagement practices for multifamily loans. To address this issue, 

Fannie Mae stated that it planned to review its existing riskmanagement processes and controls. 

• In 2011, FHFA reviewed certain loans and advised Fannie Mae to 

strengthen its underwriting and quality control practices related to 

appraisals and verification of financial information. Fannie Mae stated 

that it would review its procedures and consult with FHFA as it 

proceeded. 

• Additionally, in 2011 Fannie Mae agreed to respond to supervisory 

concerns relating to waiver and exception monitoring and reporting. 
 

Page 66 GAO-12-849 Multifamily Housing Financing

Fannie Mae stated that it would analyze the loans that had been 

granted waivers or extensions to determine if there were correlations 

between waivers and subsequent loan performance. 

• OFHEO reported in 2008 that Fannie Mae’s credit review function was 

understaffed and that information system deficiencies or inefficiencies 

compromised the enterprises’ ability to manage risks. FHFA also 

identified deficiencies with Fannie Mae’s information systems in 2009 

and 2010. According to FHFA, Fannie Mae has begun a 

transformation initiative to centralize data sources and improve data 

integrity.

We reviewed OFHEO’s annual reports to Congress from 1997 through 

2008. During this 12-year period, OFHEO did not report any credit risk 

deficiencies in Freddie Mac’s multifamily housing activities. However, 

since 2009 FHFA has identified deficiencies in Freddie Mac’s multifamily 

asset-management function. For example, FHFA reported in its 2009 

Annual Report to Congress that a targeted examination of Freddie Mac’s 

asset-management function had found that the function needed to be 

strengthened. FHFA noted that the multifamily business unit had begun to 

address some of the issues identified. In its 2010 Annual Report to 

Congress, FHFA continued to report on deficiencies with Freddie Mac’s 

asset-management function, including that it was poorly managed and 

lacked the necessary process and controls to identify, evaluate, and 

control problem assets. Additionally, the 2010 report noted problems with 

the multifamily division’s management of the problem loan watch list.76 In 

this report, FHFA noted that while risk management for multifamily asset 

management was unsatisfactory, management had corrected or was 

addressing these issues. According to FHFA officials, these deficiencies 

have since been addressed and closed.

We provided a draft of this report to FHFA, and it provided copies to 

Fannie Mae and Freddie Mac. FHFA, Fannie Mae, and Freddie Mac 

provided technical comments, which we incorporated into the report 

where appropriate.

 

76The watch list is a list of high-risk loans that receives ongoing oversight by Freddie Mac. 

Freddie Mac has various criteria for placing a loan on the watch list, including low debtservice coverage ratios, high LTV ratios, and loans that have gone delinquent.

Freddie Mac’s Multifamily 

Credit Risk Challenges 

Agency Comments 

and Our Evaluation
 

Page 67 GAO-12-849 Multifamily Housing Financing

As agreed with your office, unless you publicly announce the contents of 

this report earlier, we plan no further distribution until 30 days from the 

report date. At that time, we will send copies to the Acting Director of 

FHFA and interested committees. In addition, the report will be available 

at no charge on the GAO website at http://www.gao.gov. 

If you or your staff have any questions concerning this report, please 

contact me at (202) 512-8678 or shearw@gao.gov. Contact points for our 

Offices of Congressional Relations and Public Affairs may be found on 

the last page of this report. Key contributors to this report are listed in 

appendix VI. 

Sincerely yours,

William B. Shear

Director, Financial Markets and

 Community Investment
Appendix I: Objectives, Scope, and 

Methodology

Page 68 GAO-12-849 Multifamily Housing Financing

Our objectives were to determine (1) how Fannie Mae and Freddie Mac’s 

(the enterprises) multifamily loan activities, products, and loan 

performance have changed over time; (2) the enterprises’ role in the 

multifamily housing financing marketplace and the extent to which they 

have met their affordable housing goals; and (3) how the enterprises’ 

credit standards and delinquency rates compare with those of other 

mortgage capital sources and how they have managed credit risk 

associated with their multifamily housing activities.

To describe how the enterprises’ multifamily loan activities, products, and 

performance have changed, we analyzed loan-level data from Fannie 

Mae and Freddie Mac for 1994 (the earliest year for which data were 

available) through 2011. Each enterprise provided data on the 

characteristics (at acquisition) of the multifamily loans they purchased and 

data on the performance of loans over time. We used the data to 

determine how many loans each enterprise purchased each year from 

1994 through 2011 and the unpaid principal balance of those loans at the 

time of acquisition.1 Because certain Fannie Mae multifamily loan 

products roll over periodically (which creates a new loan number but does 

not represent a new acquisition), we used a new acquisition indicator 

provided by Fannie Mae to identify its acquisitions each year.2 When 

fluctuations in purchase volume were identified, we interviewed Fannie 

Mae and Freddie Mac officials to determine the reasons for these 

fluctuations. We also analyzed data on each enterprise’s annual 

purchases of multifamily loans to determine the unpaid principal balance 

of (1) loans that the enterprise expected to hold in portfolio; (2) loans that 

it expected to securitize (that is, packaging them into mortgage pools to 

support mortgage-backed securities (MBS)); and (3) bond credit 

enhancements.3

 

1

Unpaid principal balance is the remaining outstanding balance on loans acquired and is a 

key metric the multifamily industry uses to measure portfolio activity.

For Fannie Mae, securitized loans included MBS and 

2

For example, Fannie Mae’s discount mortgage-backed securities—which are short-term 

securities—roll over every 30, 60, or 90 days until the maturity date of the underlying loan. 

New loan numbers get assigned after each security rollover, but the issuance of the new 

security does not represent new financing.

3

The enterprises’ multifamily portfolios include various types of credit enhancements for 

tax-exempt bonds issued by state and local housing finance agencies to finance 

affordable rental housing. Should the bonds default, the enterprises guarantee that they 

will provide supplemental funds to permit the continued payment of principal and interest 

to bondholders.

Appendix I: Objectives, Scope, and 

Methodology 
Appendix I: Objectives, Scope, and 

Methodology

Page 69 GAO-12-849 Multifamily Housing Financing

discount MBS. Freddie Mac’s securitized portfolio included participation 

certificates, tax-exempt bond securitization, and K-deals.4

In addition, we analyzed each enterprise’s annual multifamily loan 

purchases from 1994 through 2011 as follows: 

Because we 

were unable to use the loan-level data provided by the two enterprises to 

determine how much of the multifamily MBS they issued were held in 

portfolio or sold to investors, we asked both enterprises to provide 

additional information on MBS held in portfolio. Both enterprises were 

able to provide data on purchases of their own MBS in 2010 and 2011. 

• Size of properties financed—We determined the number and unpaid 

principal balance of loans purchased each year that financed 

properties with 5 to 50 units and properties with 51 or more units.

• Loan size—We determined the number and unpaid principal balance 

of loans purchased each year that fell into the following four 

categories: $0 to less than $5 million, $5 million to less than $50 

million, $50 million to less than $100 million, and $100 million or 

greater. 

• Geography—We determined the unpaid principal balance of loans 

acquired each year in the 25 largest metropolitan statistical areas.5

For Fannie Mae, we limited our analysis to single loans associated 

with a single property.6

 

4

Participation certificates are securities that represent undivided beneficial ownership 

interests in, and receive payments from, pools of multifamily residential mortgages that 

are held in trust for investors. In a tax-exempt bond securitization, pools of unenhanced 

tax-exempt and taxable multifamily housing revenue bonds support fully guaranteed taxexempt and taxable securities. K-deals are securities that are generally backed by pools 

of newly purchased mortgages underwritten by Freddie Mac.

To determine the percentage of the nation’s 

multifamily stock that was located in these 25 metropolitan areas, we 

analyzed data from the 2010 American Community Survey. In addition 

to focusing on the 25 largest metropolitan areas, we also determined 

the unpaid principal balance of loans acquired in each state 

(excluding loans associated with multiple properties as described 

above).

5

Metropolitan statistical areas are geographic entities the Office of Management and 

Budget defined for use by federal statistical agencies in collecting, tabulating, and 

publishing federal statistics. They contain a core urban area with a population of 50,000 or 

more. 

6

Financing options offered by Fannie Mae can result in one loan for multiple properties, 

multiple loans for multiple properties, or multiple loans for one property.
Appendix I: Objectives, Scope, and 

Methodology

Page 70 GAO-12-849 Multifamily Housing Financing

• Period of the loan—We determined the number and unpaid principal 

balance of loans purchased each year that fell into the following four 

categories: 60 months or fewer, greater than 60 months to less than 

120 months, 120 months, and more than 120 months.

• Asset class—We determined the percentage of loans purchased

during the 18-year period (based on unpaid principal balance) in the 

following five asset classes: traditional rental, student, senior, 

manufactured, and cooperative housing.7

• Type of interest rate—We determined the percentage of loans 

purchased each year (based on unpaid principal balance) that were 

fixed- and adjustable-rate mortgages.

• Structured finance—We determined the percentage of unpaid 

principal balance acquired each year that was associated with 

transactions involving multiple loans or multiple properties.

8

• Fannie Mae’s Delegated Underwriting and Servicing (DUS®) 

Program—We determined the number and unpaid principal balance of 

loans that were purchased under the DUS program each year.9

For all of the analyses of the enterprises’ multifamily loan purchases, we 

adjusted the dollar amounts for inflation. In addition, for each analysis we 

did not include loans with missing values.10

We also analyzed data on the performance of multifamily loans each 

enterprise purchased from 1994 to 2011 as follows: 

 

 

7

Traditional multifamily rental housing is housing with five or more units that is not student, 

senior, manufactured, or cooperative housing. Multifamily loans for student housing are 

secured by properties in which college or graduate students make up at least 80 percent 

of the tenants, among other requirements. Multifamily loans for senior housing are 

secured by properties intended to be for residents aged 55 or older and that provide 

additional services for residents, such as group meals. Multifamily loans for manufactured 

housing are secured by a residential development that consists of sites for manufactured 

homes and includes infrastructure. A cooperative loan is a multifamily loan made to a 

cooperative housing corporation and secured by a first or second subordinate lien on a 

cooperative multifamily housing project that contains five or more units.

8

At Fannie Mae, transactions can involve multiple properties financed by one loan, 

multiple properties financed by multiple loans, or one property financed by multiple loans. 

At Freddie Mac, transactions can involve multiple properties financed by one loan or one 

property financed by multiple loans.

9

Under the DUS model, Fannie Mae approves lenders and delegates to them the authority 

to underwrite, close, and sell loans to the enterprise without its prior review. 

10The number of loans with missing values generally represented less than 5 percent of 

each enterprise’s unpaid principal balance.
Appendix I: Objectives, Scope, and 

Methodology

Page 71 GAO-12-849 Multifamily Housing Financing

• Serious delinquency rates—We calculated annual serious 

delinquency rates by dividing the current unpaid principal balance of 

loans that were 60 or more days delinquent as of the end of the year 

by the total outstanding unpaid principal balance as of the end of the 

year.11

• Loan maturity—We determined the number and unpaid principal 

balance of loans that were going to mature within the next 10 years.

We also determined the amount of each enterprise’s 

outstanding unpaid principal balance that was 60 or more days 

delinquent at the end of each year. 

• Serious delinquency rates for loans with varying debt-service 

coverage and loan-to-value (LTV) ratios—We determined the serious 

delinquency rates for loans with debt-service coverage ratios above 

and below 1.25 and for loans with LTV ratios above and below 80 

percent.

For the loan maturity analysis, we adjusted the dollar amounts for 

inflation. For each analysis, we did not include loans with missing 

values.12

We also analyzed aggregated multifamily data that both Fannie Mae and 

Freddie Mac provided on the following:

• real estate-owned (REO) properties from 2002 through 2011 for 

Fannie Mae and from 1995 through 2011 for Freddie Mac;

• net income from 2002 through 2011 for Fannie Mae and from 2005 

through 2011 for Freddie Mac;

• net charge-offs (debts an entity is unlikely to collect) from 2002 

through 2011;13

• guarantee fees collected from 2002 through 2011; and 

 

11When reporting delinquency rates, Fannie Mae typically divides the delinquent unpaid 

principal balance by the total outstanding unpaid principal balance. Because we did not 

have data on the delinquent unpaid principal, we used the current unpaid principal 

balance.

12The number of loans with missing values generally represented less than 5 percent of 

each enterprise’s unpaid principal balance.

13Fannie Mae and Freddie Mac define net multifamily charge-offs as the realization of 

losses on loans that have been deemed uncollectible, typically due to foreclosure.
Appendix I: Objectives, Scope, and 

Methodology

Page 72 GAO-12-849 Multifamily Housing Financing

• administrative costs from 2002 through 2011 for Fannie Mae and from 

2005 through 2011 for Freddie Mac.14

To assess the reliability of these data, we interviewed Fannie Mae and 

Freddie Mac representatives about how they collected data and helped 

ensure data integrity, and reviewed internal reports on data reliability. We 

also compared selected enterprise data with information in public filings. 

In addition, we conducted reasonableness checks on the data to identify

any missing, erroneous, or outlying figures. We determined that the data 

were sufficiently reliable for our purposes.

To determine what information is available about the enterprises’ role in 

the multifamily housing financing marketplace, we analyzed data on 

Fannie Mae and Freddie Mac’s share of the multifamily housing market 

from 2005 through 2011.15 First, we analyzed Flow of Funds data (Table 

L.219, published on June 7, 2012) from the Board of Governors of the 

Federal Reserve System (Federal Reserve) on multifamily mortgage debt 

outstanding to determine the enterprises’ share of debt holdings.16

 

14Aggregate data for earlier years were not available. We also requested aggregated data 

on capital costs, capital reserves, and loan servicing fees, but the enterprises were not 

able to provide data specific to their multifamily business.

Second, we analyzed data on the financing of multifamily loans originated 

by large institutional lenders that the Mortgage Bankers Association 

(MBA) published. MBA gathers these multifamily origination data through 

a survey and publishes the data in its Annual Commercial/Multifamily 

Mortgage Bankers Origination Summation. In 2011, 99 firms participated 

in MBA’s survey, including life insurance companies, commercial 

mortgage-backed securities (CMBS) lenders, lenders that sell loans to 

Fannie Mae and Freddie Mac, FHA lenders, and other lender groups. The 

survey did not include small banks and savings and loan associations 

(thrifts) because they tend to operate as a separate market, according to 

MBA. Although not comprehensive, the survey data from MBA are the 

data most often cited when discussing the enterprises’ share of the 

multifamily housing financing marketplace. We assessed the reliability of 

both types of data—mortgage debt outstanding and multifamily origination 

15We reviewed data for 2005 through 2011 so that we could determine the enterprises’ 

share of the multifamily housing financing marketplace before and after the financial crisis 

of 2007. 

16Board of Governors of the Federal Reserve System, Flow of Funds Accounts of the 

United States, Z.1 Statistical Release, Table L.219 (June 7, 2012). 
Appendix I: Objectives, Scope, and 

Methodology

Page 73 GAO-12-849 Multifamily Housing Financing

data—by interviewing Federal Reserve and MBA representatives, 

respectively, about the methods they used to collect and help ensure the 

integrity of the information. We determined that the data were sufficiently 

reliable for our purposes. We also compared data from the enterprises 

and two major participants in the multifamily housing financing 

marketplace—life insurance companies and CMBS lenders—to illustrate 

how these participants’ multifamily activities have changed over time. 

Specifically, we compared data obtained from the American Council of 

Life Insurers (ACLI) and Trepp on loans originated from 2005 through 

2011 with our analysis of data from Fannie Mae and Freddie Mac on 

loans purchased during those years.17

To identify reports on the enterprises’ role in the multifamily housing 

financing marketplace, we conducted a search of literature published 

since 1995 but found few studies that focused on the enterprises’ 

multifamily activities. Ultimately, we identified seven studies that provided 

varying viewpoints on the role that Fannie Mae and Freddie Mac have 

played in multifamily housing finance.

We assessed the reliability of the 

ACLI and Trepp data by sending them a set of standard data reliability 

questions and obtaining their written responses. We followed up with 

them when we had questions on the data or their responses to our data 

reliability questions. Where possible, we also compared the data they 

provided to us with published data. We determined that the data were 

sufficiently reliable for our purposes. 

18

 

17Trepp is a provider of CMBS analytics, data, consulting, and software to the securities 

and investment management industry. 

Although we found that these 

18See Mortgage Finance Working Group’s Multifamily Subcommittee, Center for American 

Progress, A Responsible Market for Rental Housing Finance: Envisioning the Future of 

the U.S. Secondary Market for Multifamily Residential Rental Mortgages (October 2010); 

Denise DiPasquale, “Rental Housing: Current Market Conditions and the Role of Federal 

Policy,” Cityscape, 13, no. 2 (2011); Ingrid Gould Ellen, John Napier Tye, and Mark A. 

Willis, Improving U.S. Housing Finance through Reform of Fannie Mae and Freddie Mac: 

Assessing the Options (NYU Furman Center for Real Estate and Urban Policy: May 

2010); Joint Center for Housing Studies, Harvard University, Meeting Multifamily Housing 

Finance Needs During and After the Credit Crisis (2009); Ethan Handelman, David A. 

Smith, and Todd Trehubenko, Government-Sponsored Enterprises and Multifamily 

Housing Finance: Refocusing on Core Functions, report prepared for the National Housing 

Conference (October 2010); Peter J. Wallison, Alex J. Pollock, and Edward J. Pinto, 

Taking the Government Out of Housing Finance: Principles for Reforming the Housing 

Finance Market, an American Enterprise Institute Policy White Paper (Mar. 24, 2011); and 

Tom White and Charlie Wilkins, No Federal Guaranty for Multifamily and Other Ideas for 

Multifamily Housing Finance Reform, paper presented at an American Enterprise Institutehosted event entitled “A New Lease on Loans: Ideas for Multifamily Housing Reform” 

(Washington, D.C.: Nov. 16, 2011).
Appendix I: Objectives, Scope, and 

Methodology

Page 74 GAO-12-849 Multifamily Housing Financing

studies lacked empirical research, we determined that they were 

sufficiently reliable for our purposes (identifying literature and authors’ 

conclusions and the limitations of the studies). To obtain additional views 

on the enterprises’ role in multifamily housing financing, we met with the 

authors of two of these studies and with researchers who have 

knowledge about housing finance and the operations of the enterprises. 

We also discussed the enterprises’ role with representatives from the 

Federal Housing Finance Agency (FHFA); Fannie Mae; Freddie Mac; 

other participants in the multifamily housing financing marketplace such 

as ACLI, the Commercial Real Estate Finance Council (CREFC), the 

Federal Housing Administration (FHA), MBA, the National Association of 

Affordable Housing Lenders (NAAHL), the National Council of State 

Housing Agencies (NCSHA), and the Department of Agriculture’s Rural 

Housing Service (RHS); the National Multi Housing Council; and the 

Consumer Federation of America. To comment on the enterprises’ role in 

financing loans for small properties (5 to 50 units), we analyzed data from 

the 2010 American Community Survey on the percentage of renters who 

live in small multifamily structures and data from the enterprises’ 2011

Annual Housing Activity Reports on their purchases of loans for such 

properties. We reviewed information on the American Community Survey

data we used and determined that the data were sufficiently reliable for 

the purposes of our report.

To report on the extent to which the enterprises have met their affordable 

housing goals, we reviewed the laws and regulations establishing the 

goals from 1992 to the present. We also reviewed reports on the 

affordable housing goals, including GAO reports and reports from the 

Department of Housing and Urban Development (HUD), FHFA, the Office 

of Federal Housing Enterprise Oversight (OFHEO), and independent 

researchers.19 We relied on HUD documents to assess the enterprises’ 

annual goal performance from 1993 through 2000.

20

 

19See, for example, John C. Weicher, The Affordable Housing Goals, Homeownership 

and Risk: Some Lessons from Past Efforts to Regulate the GSEs, paper presented at a 

Federal Reserve Bank of St. Louis conference entitled “The Past, Present, and Future of 

the Government-Sponsored Enterprises” (St. Louis, Mo.: Nov. 17, 2010). 

 For 2001 through

20See, for example, HUD, Office of Policy Development and Research, Summary of U.S. 

Housing Market Conditions (Washington, D.C.: Summer 1998). We relied on these reports 

to determine whether the enterprises met their goals in 1993 through 2000 because FHFA 

was unable to provide official annual reports from HUD showing each year’s goals and the 

enterprises’ performance relative to their goals.
Appendix I: Objectives, Scope, and 

Methodology

Page 75 GAO-12-849 Multifamily Housing Financing

2009, we analyzed data in Annual Housing Activity Reports (activity 

report) provided by FHFA. To assess the contribution of the enterprises’ 

multifamily activities to achievement of the affordable housing goals from 

2001 through 2009, we calculated multifamily purchases as a percentage 

of the total mortgage purchases used to meet each goal using data from 

the activity reports. We assessed the reliability of the data used to 

document goal performance by interviewing FHFA officials and 

representatives at Fannie Mae and Freddie Mac about the methods they 

use to collect and help ensure the integrity of the information. We also 

reviewed internal reports that the enterprises completed related to data 

reliability. We determined that the data were sufficiently reliable for our 

purposes.

To compare the enterprises’ credit standards and delinquency rates with 

those of major mortgage capital sources, we analyzed loan-level data on 

the enterprises’ median debt-service coverage and LTV ratios and 

delinquency rates. We compared these ratios and delinquency rates with 

those of selected market players:

• For life insurance companies, ACLI provided us with data from 2005 

through 2011 on median debt-service coverage ratios, median LTV 

ratios, the percentage of the outstanding unpaid principal balance that 

was 60 days or more delinquent as of the end of each year, median 

loan size, and median number of units per property.

• For CMBS lenders, we obtained data from Trepp for 2005 through 

2011 on median debt-service coverage ratios, median LTV ratios,

median loan size, median number of units per property, and the 

percentage of loans 60 days or more delinquent—based on unpaid 

principal balance—for only those loans originated from 2005 through 

2010.

• We obtained data from FHA on the percentage of loans 60 days or 

more delinquent—based on unpaid principal balance—for only those 

loans originated from 2005 through 2010.

• We obtained data from RHS for 2005 through 2011 on the number of 

loans 60 days or more delinquent, the average loan size, and the 

average units per property.

• For state and local housing finance agencies (HFA), NCSHA helped 

us obtain data from four state and two local HFAs.21

 

21According to NCSHA officials, they recommended these state and local HFAs based on 

the large size of their multifamily programs and because they provided diversity in 

geography and size. 

Specifically, we 
Appendix I: Objectives, Scope, and 

Methodology

Page 76 GAO-12-849 Multifamily Housing Financing

obtained data on median debt-service coverage ratios, median LTV 

ratios, percentage of outstanding unpaid principal balances that were 

60 days or more delinquent, median loan size, and median number of 

units per property.22

• For loan consortiums, NAAHL helped us obtain data from three 

consortiums.23 Specifically, we obtained data for 2005 through 2011 

on median debt-service coverage ratios, median LTV ratios, and the 

percentage of loans 60 days or more delinquent.24

We assessed the reliability of the data provided by these data sources by 

sending them a set of standard data reliability questions and obtaining 

their written responses. We followed up with the specific sources of data 

when we had questions about the data or their responses to our data 

reliability questions. Where possible, we also compared the data they 

provided to us with published data. We determined that the data were 

sufficiently reliable for our purposes. We also interviewed officials from 

ACLI, CREFC, FHA, RHS, NCSHA, and NAAHL. 

Additionally, two of 

the three loan consortiums provided us with data on median loan size 

and the median number of units per property.

To determine the extent to which the enterprises shared risk with FHA

and RHS, we obtained loan-level and aggregated data from the 

enterprises on the number of loans in risk-sharing programs with FHA 

and RHS. As discussed earlier, we took a number of steps to assess the 

reliability of the loan-level and aggregated data and determined that the

data were sufficiently reliable for our purposes. To help us understand 

how these risk-sharing programs operate, we reviewed documents 

describing the programs, including memorandums of understanding 

between the enterprises and FHA and RHS. We reviewed documentation 

on the enterprises’ efforts to support state and local HFAs, including the 

Department of the Treasury’s temporary HFA initiative. We also 

interviewed officials from Fannie Mae, Freddie Mac, FHA, RHS, NCSHA, 

and selected state and local HFAs to obtain information on their 

experiences with these programs.

 

22One HFA was unable to provide us with median debt-service coverage ratios. 

23These were the only three consortiums that responded to our request for data. 

24One loan consortium was unable to provide us with data on median LTV ratios, median 

loan sizes, and median number of units per property.
Appendix I: Objectives, Scope, and 

Methodology

Page 77 GAO-12-849 Multifamily Housing Financing

To describe how the enterprises managed credit risk associated with their 

multifamily activities, we reviewed FHFA’s examination reports and 

OFHEO and FHFA annual reports to Congress, which summarize credit 

risk issues identified during annual examinations of the enterprises. We 

also interviewed FHFA officials to obtain information on current credit risk 

issues. To describe how the enterprises have addressed or will address 

these issues, we reviewed the enterprises’ formal responses to FHFA’s 

examination reports and any subsequent FHFA responses. Because 

FHFA’s examination reports and the enterprises’ responses are 

confidential, we limited our discussions of them to a summary. We also 

made revisions based on concerns FHFA raised with our original 

language summarizing supervisory concerns expressed in examination 

reports.

We conducted this performance audit from November 2011 to September 

2012 in accordance with generally accepted government auditing 

standards. Those standards require that we plan and perform the audit to 

obtain sufficient, appropriate evidence to provide a reasonable basis for 

our findings and conclusions based on our audit objectives. We believe 

that the evidence obtained provides a reasonable basis for our findings 

and conclusions based on our audit objectives. 
 

Page 78 GAO-12-849 Multifamily Housing Financing

This appendix provides the data that support the interactive maps in this report (figs. 5 and 6). Specifically, table 12 shows Fannie Mae’s multifamily 

loan purchases in the 25 largest metropolitan statistical areas (MSA) from 1994 through 2011.1

Table 12: Fannie Mae’s Multifamily Loan Purchases in the 25 Largest Metropolitan Areas, 1994-2011 (Numbers in thousands) 

MSA 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

New York-Northern New JerseyLong Island, NY-NJ-PA $744,141 $316,137 $1,045,773 $966,751 $1,379,102 $1,247,888 $779,314 $2,377,162 $3,192,993 $5,733,621 $4,303,917 $3,877,184 $4,023,909 $5,456,795 $3,331,178 $1,642,534 $1,602,823 $2,107,160

Los Angeles-Long Beach-Santa Ana, 

CA 193,155 1,090,211 443,937 427,237 2,728,972 882,790 591,222 2,190,293 3,227,513 7,474,893 2,253,669 3,812,396 2,947,757 5,006,683 4,693,595 2,246,120 2,503,525 1,688,719

Chicago-Joliet-Naperville, IL-IN-WI 159,606 304,689 261,066 202,107 335,301 280,243 248,369 536,809 258,059 553,946 312,787 410,657 405,133 661,342 908,570 445,993 362,785 611,549

Dallas-Fort Worth-Arlington, TX 260,535 283,680 648,148 554,908 559,759 513,918 519,902 797,390 392,798 276,426 349,067 450,081 444,041 678,853 1,068,544 423,324 534,187 1,098,665

Philadelphia-Camden-Wilmington, 

PA-NJ-DE-MD 90,359 99,101 237,716 90,612 456,009 95,860 153,163 383,988 337,505 655,283 386,825 677,978 531,173 654,429 738,626 434,437 438,469 367,251

Houston-Sugar Land-Baytown, TX 189,002 157,105 191,885 221,139 211,003 292,489 207,980 678,698 474,419 656,017 310,041 320,471 347,096 635,106 695,509 386,099 188,618 447,744

Washington-Arlington-Alexandria, 

DC-VA-MD-WV 487,909 111,477 260,086 815,911 434,551 369,827 681,352 1,062,119 688,892 675,196 759,981 854,436 666,393 604,191 978,292 837,503 1,224,012 1,368,551

Miami-Fort Lauderdale-Pompano 

Beach, FL 161,563 187,811 103,843 88,851 165,871 253,629 258,201 539,022 378,649 473,447 248,655 125,296 254,791 305,189 360,493 291,370 349,543 488,996

Atlanta-Sandy Springs-Marietta, GA 207,721 505,419 277,673 198,247 248,780 374,844 542,991 503,549 297,358 333,497 224,567 318,887 307,769 269,413 495,317 180,582 192,989 331,364

Boston-Cambridge-Quincy, MA-NH 25,067 121,465 284,170 83,351 187,234 202,243 111,179 215,387 257,189 552,591 207,520 227,707 355,990 296,435 493,423 223,776 162,777 323,548

San Francisco-Oakland-Fremont, CA 183,764 383,417 204,306 79,335 758,383 337,698 290,418 1,197,640 1,385,614 3,025,069 929,912 1,010,337 703,834 1,902,171 668,051 542,974 670,690 745,012

Detroit-Warren-Livonia, MI 110,677 78,557 187,459 81,634 118,438 187,072 253,395 334,847 216,139 313,633 180,732 183,639 261,046 205,137 306,178 39,272 18,176 122,245

Riverside-San Bernardino-Ontario, 

CA 57,507 56,322 77,402 65,831 101,698 144,180 140,042 512,921 479,780 599,849 408,861 507,096 215,590 519,422 453,819 383,742 209,733 429,682

Phoenix-Mesa-Glendale, AZ 210,975 132,133 209,013 187,861 329,813 180,843 243,343 291,264 185,562 237,146 239,265 304,002 262,805 276,380 340,706 236,112 265,024 334,577

Seattle-Tacoma, Bellevue, WA 130,902 47,826 284,131 337,617 477,519 461,248 264,806 710,523 445,676 963,368 473,119 795,925 775,228 1,087,787 690,980 503,675 507,754 755,478

Minneapolis-St. Paul-Bloomington, 

MN-WI 46,588 78,893 93,671 69,360 144,920 93,722 161,660 293,075 338,210 391,891 207,332 339,476 222,441 344,418 232,052 261,294 151,538 267,636

 

1

Metropolitan statistical areas are geographic entities the Office of Management and Budget defined for use by federal statistical agencies in collecting, tabulating, and publishing 

federal statistics. They contain a core urban area with a population of 50,000 or more.

Appendix II: Fannie Mae and Freddie Mac’s Multifamily Loan 

Purchases in the 25 Largest Metropolitan Areas
Appendix II: Fannie Mae and Freddie Mac’s Multifamily Loan Purchases in the 25 Largest Metropolitan Areas

Page 79 GAO-12-849 Multifamily Housing Financing

MSA 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

San Diego-Carlsbad-San Marcos, 

CA 115,646 284,867 96,833 89,659 545,440 199,398 338,029 619,180 576,425 1,875,615 354,079 698,159 387,975 914,426 780,067 464,152 364,279 547,635

St. Louis, MO-IL 30,975 61,940 60,222 100,904 123,889 74,390 22,742 50,442 178,155 168,635 65,811 129,096 172,531 214,876 184,667 44,648 118,723 138,239

Tampa-St. Petersburg-Clearwater, 

FL 43,636 67,424 54,090 19,133 54,360 132,055 153,703 175,091 197,644 182,369 223,621 358,157 177,865 281,639 185,247 115,731 106,910 218,834

Baltimore-Towson, MD 52,195 86,834 292,355 215,217 225,269 85,167 201,038 246,974 385,717 749,660 463,337 323,491 407,868 483,970 206,235 233,707 193,216 352,232

Denver-Aurora-Broomfield, CO 144,852 130,556 108,356 108,655 293,959 200,359 375,825 301,975 378,944 362,331 94,183 195,868 116,886 296,874 326,176 361,348 408,563 504,864

Pittsburgh, PA 11,258 7,749 11,528 22,065 56,284 21,741 21,628 30,573 28,328 12,452 19,103 62,112 37,662 43,533 88,682 37,857 102,438 44,072

Portland-Vancouver-Hillsboro, ORWA 130,061 21,876 64,558 88,133 181,140 142,531 92,721 317,825 147,658 577,599 192,460 209,527 74,645 276,476 284,889 187,602 299,319 363,801

Sacramento-Arden-Arcade-Roseville, 

CA 58,535 114,800 62,391 99,771 208,988 207,552 242,558 590,909 624,506 1,100,782 189,908 342,004 309,785 446,056 282,184 256,999 234,986 414,916

San Antonio-New Braunfels, TX 114,363 33,425 69,728 62,327 158,068 53,103 84,178 146,315 124,249 103,795 146,853 213,202 101,279 188,455 184,899 137,262 90,626 334,612

Total $3,960,990 $4,763,715 $5,630,336 $5,276,615 $10,484,750 $7,034,787 $6,979,756 $15,103,971 $15,197,980 $28,049,113 $13,545,606 $16,747,181 $14,511,489 $22,050,054 $18,978,378 $10,918,113 $11,301,703 $14,407,381

Source: GAO analysis of Fannie Mae data.

Note: All dollar figures are in 2012 dollars. We included only those purchases where a single loan was associated with a single property. As discussed 

earlier in this report, Fannie Mae offers financing options that can result in one loan for multiple properties, multiple loans for multiple properties, or 

multiple loans for one property.

Table 13 shows Freddie Mac’s multifamily loan purchases in the 25 largest MSAs from 1994 through 2011.
Appendix II: Fannie Mae and Freddie Mac’s Multifamily Loan Purchases in the 25 Largest Metropolitan Areas

Page 80 GAO-12-849 Multifamily Housing Financing

Table 13: Freddie Mac’s Multifamily Loan Purchases in the 25 Largest Metropolitan Areas, 1994-2011 (Numbers in thousands)

MSA 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

New YorkNorthern New 

Jersey-Long 

Island, NY-NJPA $98,688 $236,343 $400,449 $308,555 $595,265 $954,772 $1,144,572 $1,236,949 $916,149 $1,634,769 $1,179,272 $1,148,238 $1,457,941 $1,539,477 $1,940,288 $2,464,723 $1,589,207 $1,440,366

Los AngelesLong BeachSanta Ana, CA 92,853 9,192 45,635 55,712 336,592 808,919 570,388 1,069,601 1,738,336 4,560,043 1,639,905 489,965 1,013,025 1,452,313 1,581,290 2,080,086 878,087 1,323,208

Chicago-JolietNaperville, ILIN-WI 6,609 55,753 113,224 43,343 121,094 424,976 307,711 206,089 523,214 1,110,551 379,521 293,569 396,899 617,956 788,486 357,806 504,584 393,335

Dallas-Fort 

WorthArlington, TX 63,800 49,735 112,891 54,673 8,659 381,015 141,791 542,542 658,402 380,499 761,447 876,955 696,385 1,301,356 1,431,090 809,458 566,460 946,068

PhiladelphiaCamdenWilmington, 

PA-NJ-DE-MD 38,257 83,317 237,688 118,309 164,235 128,289 125,509 120,192 213,443 196,386 462,110 331,806 326,157 370,700 581,694 225,782 368,133 261,067

HoustonSugar LandBaytown, TX 32,742 18,585 37,707 169,185 74,981 219,197 172,053 249,732 482,589 313,643 183,060 306,875 280,425 777,784 918,692 731,871 581,965 878,911

WashingtonArlingtonAlexandria, 

DC-VA-MDWV 86,414 61,926 69,220 189,667 200,386 700,749 555,173 513,366 662,132 547,724 702,160 430,358 1,306,965 1,713,566 1,786,065 1,464,062 1,481,161 1,885,826

Miami-Fort 

LauderdalePompano 

Beach, FL 37,303 75,615 84,048 68,594 273,059 339,779 141,099 208,012 215,487 286,767 109,039 234,294 216,749 408,907 474,604 402,362 381,621 248,882

Atlanta-Sandy 

SpringsMarietta, GA 13,283 114,478 65,812 140,079 159,881 377,732 451,907 631,652 461,872 473,488 587,299 730,248 675,899 1,140,981 1,432,816 679,148 560,696 769,227
Appendix II: Fannie Mae and Freddie Mac’s Multifamily Loan Purchases in the 25 Largest Metropolitan Areas

Page 81 GAO-12-849 Multifamily Housing Financing

MSA 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

BostonCambridgeQuincy, MANH 20,051 16,352 45,657 4,055 110,820 108,227 104,446 272,540 254,871 116,971 238,104 139,834 139,101 543,756 402,123 455,982 180,823 237,770

San 

FranciscoOaklandFremont, CA 0 9,713 3,451 225,249 40,157 461,416 50,408 420,231 1,064,658 1,637,145 625,352 357,881 124,221 767,933 776,039 427,612 396,735 309,341

DetroitWarrenLivonia, MI 11,756 21,515 79,618 34,719 53,895 68,582 82,242 73,900 55,217 84,801 46,662 150,160 105,028 62,979 130,205 12,350 14,850 116,037

Riverside-San 

BernardinoOntario, CA 0 10,284 8,970 18,099 16,785 71,381 117,135 227,688 183,831 216,068 462,983 236,340 140,611 348,845 374,126 173,119 305,109 368,436

PhoenixMesaGlendale, AZ 3,713 29,776 37,681 20,145 58,423 198,004 205,551 210,905 255,305 81,503 264,117 270,732 190,400 293,416 478,233 526,070 401,121 515,286

SeattleTacoma, 

Bellevue, WA 6,895 42,784 23,012 78,277 116,133 129,580 129,410 300,944 168,384 222,966 303,461 351,033 176,285 824,566 696,973 529,817 300,879 687,120

MinneapolisSt. PaulBloomington, 

MN-WI 20,424 40,764 43,306 32,595 165,266 281,567 62,932 135,550 228,673 163,454 268,450 259,826 107,813 253,714 385,799 155,550 134,649 77,345

San DiegoCarlsbad-San 

Marcos, CA 41,136 33,147 29,559 92,727 144,321 208,700 125,447 514,197 630,942 961,244 587,888 170,079 165,347 475,320 606,983 316,492 311,837 321,595

St. Louis, MOIL 0 0 23,466 2,781 6,036 7,222 19,077 84,467 71,250 63,706 26,963 98,264 126,030 288,571 72,309 104,701 42,068 87,124

Tampa-St. 

PetersburgClearwater, FL 3,517 5,505 30,306 24,768 125,093 132,318 90,305 113,869 107,194 71,493 96,610 216,877 110,984 131,451 228,801 250,012 267,510 407,552

BaltimoreTowson, MD 48,712 10,243 68,499 33,501 141,717 286,844 279,298 186,492 187,662 355,031 458,447 444,548 616,001 708,209 350,448 172,733 132,564 386,512

DenverAuroraBroomfield, 

CO 1,351 88,349 69,331 11,883 151,222 184,073 113,067 353,487 244,802 136,900 90,690 120,637 261,103 461,569 522,927 553,949 346,467 578,150
Appendix II: Fannie Mae and Freddie Mac’s Multifamily Loan Purchases in the 25 Largest Metropolitan Areas

Page 82 GAO-12-849 Multifamily Housing Financing

MSA 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

Pittsburgh, PA 0 14,218 21,176 22,789 65,060 17,374 9,568 32,603 40,276 40,932 34,751 22,881 12,318 30,552 57,104 26,531 126,040 38,624

PortlandVancouverHillsboro, ORWA 581 22,716 54,429 62,793 35,803 60,689 21,274 36,559 58,778 132,516 50,846 167,700 60,128 275,651 221,758 197,850 42,448 182,175

SacramentoArden-ArcadeRoseville, CA 10,717 0 1,386 0 17,029 63,913 0 206,922 175,913 363,087 296,622 71,267 208,880 221,769 257,972 136,910 76,619 116,336

San AntonioNew 

Braunfels, TX 14,598 48,793 2,416 1,131 12,522 42,036 14,618 82,959 77,081 82,143 62,554 71,098 113,136 270,253 316,262 174,258 168,043 290,701

Total $653,399 $1,099,101 $1,708,935 $1,813,629 $3,194,434 $6,657,354 $5,034,980 $8,031,447 $9,676,461 $14,233,830 $9,918,313 $7,991,464 $9,027,830 $15,281,594 $16,813,086 $13,429,231 $10,159,674 $12,866,994

Source: GAO analysis of Freddie Mac data.

 Note: All dollar figures are in 2012 dollars. 
Appendix III: Additional Data on Fannie Mae 

and Freddie Mac’s Multifamily Activities

Page 83 GAO-12-849 Multifamily Housing Financing

In this appendix, we present additional analyses of loan-level data and 

aggregated data provided by Fannie Mae and Freddie Mac. Specifically, 

we analyzed multifamily loan-level data for 1994 through 2011 from both 

enterprises to determine (1) the unpaid principal balance of loans 

purchased in each state and (2) the delinquency rates of loans with 

various debt-service coverage and loan-to-value (LTV) ratios. In addition, 

we asked both enterprises to provide aggregated multifamily data on their 

administrative costs.

Table 14 contains data on the unpaid principal balance of multifamily 

loans Fannie Mae and Freddie Mac acquired in the 50 states, the District 

of Columbia, Puerto Rico, and the U.S. Virgin Islands from 1994 through 

2011. 

Table 14: Fannie Mae and Freddie Mac Multifamily Loan Acquisitions by State, 

1994-2011

State 

Fannie Mae 

(dollars in 

millions)

Fannie 

Mae rank

Freddie Mac 

(dollars in 

millions)

Freddie 

Mac rank

Alabama $1,988 28 $1,910 23

Alaska 240 46 0 51

Arizona 6,866 12 4,672 14

Arkansas 796 38 484 37

California 97,281 1 47,630 1 

Colorado 6,445 13 5,267 13

Connecticut 1,790 29 1,759 25

Delaware 966 36 347 41

District of Columbia 2,100 27 1,749 26

Florida 15,397 4 13,580 4 

Georgia 7,307 10 10,105 6 

Hawaii 734 40 361 39

Idaho 412 43 111 45

Illinois 7,652 9 6,775 8 

Indiana 2,644 24 1,659 28

Iowa 761 39 467 38

Kansas 1,486 32 1,684 27

Kentucky 1,044 35 833 33

Louisiana 2,932 22 1,378 29

Maine 230 47 97 46

Appendix III: Additional Data on Fannie Mae 

and Freddie Mac’s Multifamily Activities

Multifamily Loan 

Purchases by State
Appendix III: Additional Data on Fannie Mae 

and Freddie Mac’s Multifamily Activities

Page 84 GAO-12-849 Multifamily Housing Financing

State 

Fannie Mae 

(dollars in 

millions)

Fannie 

Mae rank

Freddie Mac 

(dollars in 

millions)

Freddie 

Mac rank

Maryland 11,039 6 9,966 7 

Massachusetts 4,933 17 3,647 15

Michigan 5,362 15 2,370 20

Minnesota 4,035 20 3,017 17

Mississippi 722 41 706 36

Missouri 2,754 23 2,079 21

Montana 269 45 60 48

Nebraska 1,045 34 1,076 30

Nevada 5,943 14 2,915 19

New Hampshire 806 37 338 42

New Jersey 7,228 11 5,886 10

New Mexico 1,115 33 723 35

New York 40,653 2 17,923 3 

North Carolina 4,897 18 5,713 11

North Dakota 219 48 272 43

Ohio 5,302 16 3,506 16

Oklahoma 2,275 26 812 34

Oregon 4,446 19 1,887 24

Pennsylvania 7,869 8 5,379 12

Puerto Rico 10 53 0 52

Rhode Island 480 42 360 40

South Carolina 1,695 30 1,995 22

South Dakota 280 44 126 44

Tennessee 3,178 21 2,916 18

Texas 24,748 3 22,462 2 

Utah 2,308 25 970 32

Vermont 41 51 7 50

Virginia 8,179 7 10,928 5 

Virgin Islands 13 52 0 53

Washington 12,298 5 6,517 9 

West Virginia 100 50 94 47

Wisconsin 1,625 31 1,064 31

Wyoming 130 49 31 49

Source: GAO analysis of data from Fannie Mae and Freddie Mac. 

Note: All dollar figures are in 2012 dollars. For Fannie Mae, we included only those purchases where 

a single loan was associated with a single property, or about 99 percent of the loans Fannie Mae 

acquired during the period reviewed and about 85 percent of the unpaid principal balance.
Appendix III: Additional Data on Fannie Mae 

and Freddie Mac’s Multifamily Activities

Page 85 GAO-12-849 Multifamily Housing Financing

Serious delinquency rates for multifamily loans varied by underwriting 

characteristic. Table 15 contains loan counts and serious delinquency 

rates (based on unpaid principal balance) for multifamily loans with 

original debt-service coverage ratios less than 1.25 purchased from 1994 

through 2011.

Table 15: Fannie Mae and Freddie Mac’s Serious Delinquency Rates for Multifamily Loans with Debt-Service Coverage Ratios

Less Than 1.25 

Year

Fannie Mae Freddie Mac

Number of multifamily 

loans with debt-service 

coverage ratios less 

than 1.25

Percentage of multifamily 

unpaid principal balance with 

debt-service coverage ratios 

less than 1.25 that was 60 

days or more delinquent 

Number of multifamily 

loans with debt-service 

coverage ratios less

than 1.25

Percentage of multifamily 

unpaid principal balance with 

debt-service coverage ratios 

less than 1.25 that was 60 

days or more delinquent 

1994 N/A N/A 15 0.00%

1995 373 0.00 25 0.00

1996 118 0.00 31 0.00

1997 200 0.00 35 0.00

1998 878 0.09 36 0.00

1999 936 0.12 48 0.00

2000 1,033 0.00 55 0.00

2001 1,131 0.52 62 0.00

2002 1,420 0.01 195 0.00

2003 1,568 0.50 193 0.00

2004 1,829 0.21 244 0.00

2005 2,658 0.10 340 0.00

2006 3,231 0.07 436 0.00

2007 10,459 0.06 908 0.00

2008 11,367 0.29 1,294 0.08

2009 11,200 0.82 1,400 0.82

2010 10,710 0.77 1,421 0.82

2011 10,019 0.82 1,405 0.76

Source: GAO analysis of data from Fannie Mae and Freddie Mac. 

N/A = not applicable

Note: Fannie Mae’s underwriting standards for traditional rental housing loans typically require a debtservice coverage ratio of 1.25. However, for certain asset classes, the ratio may be less than 1.25.

Table 16 contains loan counts and delinquency rates (based on unpaid 

principal balance) for multifamily loans with original debt-service coverage 

ratios greater than or equal to 1.25 purchased from 1994 through 2011.

Serious Delinquency Rates 

for Multifamily Loans with 

Various Underwriting 

Characteristics
Appendix III: Additional Data on Fannie Mae 

and Freddie Mac’s Multifamily Activities

Page 86 GAO-12-849 Multifamily Housing Financing

Table 16: Fannie Mae and Freddie Mac’s Serious Delinquency Rates for Multifamily Loans with Debt-Service Coverage Ratios

Greater Than or Equal to 1.25

Year

Fannie Mae Freddie Mac

Number of multifamily 

loans with debt-service 

coverage ratios greater 

than or equal to 1.25

Percentage of multifamily 

unpaid principal balance 

with debt-service coverage 

ratios greater than or equal 

to 1.25 that was 60 days or 

more delinquent 

Number of multifamily 

loans with debt-service 

coverage ratios greater 

than or equal to 1.25

Percentage of multifamily 

unpaid principal balance 

with debt-service coverage 

ratios greater than or equal 

to 1.25 that was 60 days or 

more delinquent 

1994 N/A N/A 107 0.00%

1995 628 0.00 329 0.00

1996 1,106 0.09 700 0.04

1997 2,102 0.12 1,015 0.00

1998 4,921 0.04 1,585 0.00

1999 6,071 0.01 2,232 0.09 

2000 6,900 0.08 2,647 0.00

2001 9,216 0.29 3,318 0.19

2002 16,336 0.05 4,408 0.14

2003 32,114 0.29 4,886 0.06

2004 31,499 0.10 5,244 0.08

2005 32,353 0.35 5,385 0.00

2006 24,893 0.08 5,397 0.06

2007 25,492 0.08 6,005 0.02

2008 28,034 0.30 6,914 0.02

2009 28,594 0.52 7,636 0.08

2010 28,804 0.67 8,110 0.17 

2011 28,211 0.48 8,515 0.12 

Source: GAO analysis of data from Fannie Mae and Freddie Mac. 

N/A = not applicable

Table 17 contains loan counts and delinquency rates (based on unpaid 

principal balance) for multifamily loans with original loan-to-value (LTV) 

ratios less than or equal to 80 percent purchased from 1994 through 

2011.
Appendix III: Additional Data on Fannie Mae 

and Freddie Mac’s Multifamily Activities

Page 87 GAO-12-849 Multifamily Housing Financing

Table 17: Fannie Mae and Freddie Mac’s Serious Delinquency Rates for Multifamily Loans with LTV Ratios Less Than or 

Equal to 80 Percent

Year

Fannie Mae Freddie Mac

Number of multifamily 

loans with LTV ratios less 

than or equal to 80 percent

Percentage of multifamily 

unpaid principal balance with 

LTV ratios less than or equal 

to 80 percent that was 60 

days or more delinquent 

Number of multifamily 

loans with LTV ratios 

less than or equal to 80 

percent

Percentage of multifamily 

unpaid principal balance 

with LTV ratios less than or 

equal to 80 percent that was 

60 days or more delinquent 

1994 2 0.00% 122 0.00%

1995 974 0.00 355 0.00

1996 1,128 0.09 732 0.04

1997 2,122 0.12 1,048 0.00

1998 5,561 0.04 1,613 0.00

1999 6,613 0.01 2,262 0.09 

2000 7,468 0.08 2,682 0.00

2001 9,773 0.30 3,355 0.19

2002 16,784 0.05 7,367 0.14

2003 32,353 0.28 17,547 0.01

2004 31,956 0.11 16,196 0.03

2005 35,103 0.32 14,432 0.00

2006 29,572 0.05 6,249 0.00

2007 34,506 0.06 7,066 0.02

2008 37,958 0.27 8,108 0.00

2009 38,369 0.62 8,876 0.10

2010 38,126 0.71 9,322 0.13 

2011 36,885 0.49 9,680 0.10

Source: GAO analysis of data from Fannie Mae and Freddie Mac. 

Table 18 contains loan counts and delinquency rates (based on unpaid 

principal balance) for multifamily loans with original LTV ratios greater 

than 80 percent purchased from 1994 through 2011.
Appendix III: Additional Data on Fannie Mae 

and Freddie Mac’s Multifamily Activities

Page 88 GAO-12-849 Multifamily Housing Financing

Table 18: Fannie Mae and Freddie Mac’s Serious Delinquency Rates for Multifamily Loans with LTV Ratios Greater Than 80 

Percent

Year

Fannie Mae Freddie Mac

Number of multifamily 

loans with LTV ratios 

greater than 80 percent

Percentage of multifamily 

unpaid principal balance 

with LTV ratios greater than 

80 percent that was 60 days 

or more delinquent 

Number of multifamily 

loans with LTV ratios 

greater than 80 percent

Percentage of multifamily 

unpaid principal balance 

with LTV ratios greater than 

80 percent that was 60 days 

or more delinquent 

1994 0 0.00% 1 0.00%

1995 17 0.00 2 0.00

1996 53 0.00 2 0.00

1997 134 0.00 5 0.00

1998 485 0.00 11 0.00

1999 569 0.13 22 0.00

2000 686 0.00 23 0.00

2001 787 0.56 28 0.00

2002 1,078 0.00 271 0.00

2003 1,336 0.78 362 0.59

2004 1,335 0.21 421 0.61

2005 1,363 0.37 451 0.00

2006 1,327 0.44 387 0.91

2007 1,378 0.32 534 0.00

2008 1,383 0.89 698 0.46

2009 1,363 0.56 729 1.58

2010 1,328 0.56 754 2.36

2011 1,290 2.91 742 2.15

Source: GAO analysis of data from Fannie Mae and Freddie Mac. 

Note: Fannie Mae’s underwriting standards for traditional rental housing loans typically require an 

LTV ratio of 80 percent. However, for certain asset classes, the ratio may exceed 80 percent.

The enterprises’ administrative costs associated with their multifamily 

business from 2002 through 2011 are shown in table 19. 

Multifamily Administrative 

Costs 
Appendix III: Additional Data on Fannie Mae 

and Freddie Mac’s Multifamily Activities

Page 89 GAO-12-849 Multifamily Housing Financing

Table 19: Fannie Mae and Freddie Mac’s Multifamily Administrative Costs, 2002-

2011

Year Fannie Mae (dollars in millions) Freddie Mac (dollars in millions)

2002 $192 No data

2003 236 No data

2004 270 No data

2005 424 $151

2006 597 182

2007 548 189

2008 404 190

2009 363 221

2010 383 212

2011 264 220

Sources: Fannie Mae and Freddie Mac. 

Note: Fannie Mae could not provide data prior to 2002, and Freddie Mac could not provide data prior 

to 2005. For Fannie Mae, the data include direct expenses, direct allocated expenses, and indirect 

expenses for its entire multifamily business. 
Appendix IV: Enterprises’ Multifamily Loan and 

Property Sizes Compared with Other Market 

Participants

Page 90 GAO-12-849 Multifamily Housing Financing

From 2005 through 2011, the size of the multifamily loans that Freddie 

Mac purchased and the properties it financed were more comparable with 

loans financed by life insurance companies than Fannie Mae. As shown 

in table 20, during this period Freddie Mac purchased loans and financed 

properties that were larger than those financed by Fannie Mae, generally 

comparable to those financed by life insurance companies, and generally 

larger than those financed by commercial mortgage-backed securities 

(CMBS) lenders. During the same period, Fannie Mae purchased smaller 

loans and financed smaller properties than those financed by Freddie 

Mac, life insurance companies, and CMBS lenders (except for 2010). 

Table 20: Median Loan Size and Number of Units for Multifamily Loans Financed by the Enterprises, Life Insurance 

Companies, and CMBS Lenders, 2005-2011

Acquisition 

or 

origination 

year 

Median loan size (dollars in thousands) Median number of units 

Fannie Mae Freddie Mac

Life insurance 

companies

CMBS 

lenders

Fannie 

Maea Freddie 

Mac

Life 

insurance 

companies

CMBS 

lenders

2005 $629 $7,450 $10,800 $5,400 13 196 210 144

2006 1,179 8,450 13,800 6,268 24 200 236 154

2007 691 7,768 13,840 7,200 15 192 224 144

2008 1,836 9,000 6,800 4,187 44 200 144 120

2009 3,280 10,170 4,850 b 92 217 144 b

2010 3,500 10,500 12,500 1,424 85 199 228 66

2011 4,365 11,500 13,000 9,040 102 212 207 222

Sources: GAO analysis of data from Fannie Mae and Freddie Mac; American Council of Life Insurers; and Trepp.

Note: For Fannie Mae and Freddie Mac, the year represents the year the loan was acquired. For life 

insurance companies and CMBS lenders, the year is the year the loan was originated.

a

The numbers for Fannie Mae may be low because we excluded loans associated with multiple 

properties. Such loans tend to finance large properties, according to Fannie Mae.

b

CMBS lenders did not originate any multifamily loans in 2009.

Other sources of multifamily housing financing—state and local housing 

finance agencies (HFA), loan consortiums, and the Rural Housing Service 

(RHS)—focused on smaller loans and properties for the most part.1

 

1

The Federal Housing Administration was not able to provide data on average or median 

loan and property size.

For 

example, as shown in table 21, data for 2005 through 2011 from three 

state HFAs showed that they financed small loans (with median loan 

Appendix IV: Enterprises’ Multifamily Loan 

and Property Sizes Compared with Other 

Market Participants
Appendix IV: Enterprises’ Multifamily Loan and 

Property Sizes Compared with Other Market 

Participants

Page 91 GAO-12-849 Multifamily Housing Financing

sizes ranging from more than $165,000 to about $4 million) and small 

properties (median units per property ranging from 12 to 95). Three other 

state and local HFAs reported median loan sizes ranging from $3 million 

to $26 million and median units per property ranging from 76 to 230.

RHS’s average loan size ranged from about $1 million to $1.4 million.2

Table 21: Median Loan Size and Number of Units for Loans Originated by Selected Housing Finance Agencies, 2005-2011 

During this period, the median number of multifamily units supported by 

RHS ranged from 44 to 50.

Origination 

year Median loan size (dollars in thousands) Median number of units

HFA 1 HFA 2 HFA 3 HFA 4 HFA 5 HFA 6 HFA 1 HFA 2 HFA3 HFA 4 HFA 5 HFA 6

2005 N/A $4,472 $391 $165 $3,750 $11,523 N/A 175 58 18 70 125

2006 N/A 4,825 508 308 2,320 10,340 N/A 92 60 13 63 104

2007 $3,000 6,773 344 215 1,703 26,000 76 109 60 16 57 230

2008 8,150 5,695 3,081 200 2,350 8,530 106 102 95 14 80 78

2009 7,502 5,430 a 1,750 3,133 16,695 160 98 a 27 75 130

2010 7,345 4,680 790 1,500 N/A 10,620 101 105 40 16 N/A 107

2011 5,203 4,880 a 1,100 1,600 12,377 96 100 a 12 50 98

Sources: Selected housing finance agencies.

N/A = data not available

a

HFA had no loans in 2009 and 2011.

The two loan consortiums that provided us with data reported much 

smaller loans than the enterprises, with median loan sizes ranging from 

$284,000 to $1.6 million and median number of units per property ranging 

from 12 to 43 (see table 22).

 

2

RHS was only able to provide us with average loan size. 
Appendix IV: Enterprises’ Multifamily Loan and 

Property Sizes Compared with Other Market 

Participants

Page 92 GAO-12-849 Multifamily Housing Financing

Table 22: Median Loan Size and Number of Units for Loans Originated by Selected 

Loan Consortiums, 2005-2011

Origination 

year

Median loan size 

(dollars in thousands) Median number of units 

LC 1 LC 2 LC 1 LC 2

2005 $284 $1,090 12 31 

2006 421 865 18 18 

2007 520 1,620 18 43 

2008 625 1,480 21 35 

2009 460 749 17 24 

2010 343 745 15 40 

2011 289 1,500 12 36 

Sources: Selected loan consortiums.
Appendix V: Data from Selected Housing 

Finance Agencies and Loan Consortiums

Page 93 GAO-12-849 Multifamily Housing Financing

This appendix contains data provided by six state and local housing 

finance agencies (HFA) and three loan consortiums on the first-lien 

multifamily mortgages that they originated from 2005 through 2011. 

Specifically, they provided data on their median debt-service coverage 

ratios, median loan-to-value (LTV) ratios, and delinquency rates. These 

data are presented as examples of specific HFA and loan consortiums for 

the purposes of comparison against information provided in this report for 

each of the enterprises. Because there can be variation between 

individual HFAs and individual loan consortiums, these data should not be 

seen as representative of all HFAs or loan consortiums.

Table 23 provides information on the median debt-service coverage and 

LTV ratios for loans originated by six HFAs from 2005 through 2011. The 

debt-service coverage ratio estimates a multifamily borrower’s ability to 

service its mortgage obligation using the secured property’s cash flow, 

after deducting nonmortgage expenses from income. The higher the debtservice coverage ratio, the more likely a multifamily borrower will be able 

to continue servicing its mortgage obligation. The LTV ratio is the ratio of 

the unpaid principal balance of a mortgage loan to the value of the 

property that serves as collateral for the loan, expressed as a percentage. 

Loans with high LTV ratios generally tend to have a higher risk of default 

and, if a default occurs, a greater risk that the amount of the gross loss 

will be high compared to loans with lower LTV ratios.

Table 23: Median Debt-Service Coverage and LTV Ratios for Loans Financed by Selected Housing Finance Agencies, 2005-

2011 

Origination 

year 

Median debt-service coverage ratio Median LTV ratio

HFA 1 HFA 2 HFA 3 HFA 4 HFA 5 HFA 6 HFA 1 HFA 2 HFA 3 HFA 4 HFA 5 HFA 6

2005 N/A 1.21 0.92 1.15 N/A 1.16 90% 44% 7% 78% 53% 68%

2006 N/A 1.20 1.72 1.15 N/A 1.20 90 60 6 65 33 75

2007 1.15 1.30 1.11 1.15 N/A 1.13 90 62 4 79 47 67

2008 1.15 1.57 0.97 1.15 N/A 1.21 90 58 16 48 36 71

2009 1.25 1.18 N/A 1.15 N/A 1.11 90 57 N/A 58 62 77

2010 1.25 1.23 1.10 1.15 N/A 1.27 90 31 11 94 N/A 64

2011 1.20 1.15 N/A 1.15 N/A 1.17 90 32 N/A 43 70 75

Sources: Selected housing finance agencies.

N/A = data not available

Note: The median LTV ratios for one of the HFAs are low because there are multiple sources of 

subordinate financing. 

Appendix V: Data from Selected Housing 

Finance Agencies and Loan Consortiums
Appendix V: Data from Selected Housing 

Finance Agencies and Loan Consortiums

Page 94 GAO-12-849 Multifamily Housing Financing

Table 24 provides information on the median debt-service coverage and 

LTV ratios for loans originated by three loan consortiums from 2005 

through 2011. 

Table 24: Median Debt-Service Coverage Ratios and LTV Ratios for Loans Financed by Selected Loan Consortiums, 2005-

2011

Origination year

Median debt-service coverage ratio Median LTV ratio

LC 1 LC 2 LC 3 LC 1 LC 2 LC 3

2005 1.24 1.27 1.17 80% 51% N/A

2006 1.22 1.23 1.14 70 59 N/A

2007 1.21 1.17 1.13 71 38 N/A

2008 1.23 1.28 1.13 75 56 N/A

2009 1.24 1.31 1.15 76 47 N/A

2010 1.27 1.25 1.18 72 35 N/A

2011 1.31 1.49 1.20 70 46 N/A

Sources: Selected loan consortiums.

N/A = data not available

Table 25 includes information on the percentage of loans seriously 

delinquent for the six HFAs. The percentage of loans seriously delinquent 

(60 or more days delinquent) each year is based on unpaid principal 

balance and the status (as of December 2011) of only those loans 

originated in that year.
Appendix V: Data from Selected Housing 

Finance Agencies and Loan Consortiums

Page 95 GAO-12-849 Multifamily Housing Financing

Table 25: Percentage of Selected Housing Finance Agencies’ Unpaid Principal 

Balances That Were Seriously Delinquent as of December 2011, 2005-2011

Origination 

year 

60 days or more delinquent

HFA 1 HFA 2 HFA 3 HFA 4 HFA 5 HFA 6

2005 0.00% 0.00% 0.00% 0.00% 5.6% 0.00%

2006 0.00 0.00 0.00 0.00 7.1% 0.00

2007 0.00 0.00 0.00 0.00 0.0% 0.00

2008 0.00 0.00 0.00 0.00 0.0% 0.00

2009 0.00 0.00 0.00 0.00 0.0% 0.00

2010 0.00 0.00 0.00 0.00 N/A 0.00

2011 0.00 0.00 0.00 0.00 0.0% 0.00

Sources: Selected housing finance agencies.

N/A = data not available

Table 26 includes information on the percentage of loans seriously 

delinquent for three loan consortiums.

Table 26: Percentage of Loans Seriously Delinquent for Selected Loan 

Consortiums, 2005-2011

Origination year

60 days or more delinquent

LC 1 LC 2 LC 3

2005 7.63% 0.00% 0.00%

2006 0.87 0.00 0.00

2007 0.00 0.00 0.00

2008 0.00 0.00 0.00

2009 0.00 0.00 0.00

2010 0.00 0.00 0.00

2011 0.00 0.00 0.00

Sources: Selected loan consortiums.
Appendix VI: GAO Contact and Staff 

Acknowledgments

Page 96 GAO-12-849 Multifamily Housing Financing

William B. Shear, (202) 512-8678 or shearw@gao.gov

In addition to the contact named above, Paige Smith (Assistant Director), 

Farah Angersola, Steve Brown, William Chatlos, John Karikari, John 

McGrail, Jon Menaster, John Mingus, Marc Molino, José R. Peña, 

Barbara Roesmann, Jim Vitarello, and Heneng Yu made key 

contributions to this report.

Appendix VI: GAO Contact and Staff 

Acknowledgments 

GAO Contact

Staff 

Acknowledgments 

(250642)
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