Fannie Mae, Freddie Mac Share of Multifamily Lending Market Shrinking in 2016

Fannie Mae and Freddie Mac have seen their combined share of multifamily lending decrease this year to 44% – down from 52% in each of the preceding three years, according to analysis of data by Fannie Mae.

Other lenders, most notably U.S. banks, financial services companies, international banks and life insurers, all increased their multifamily lending activity during the first six months of 2016.

While Fannie and Freddie combined still account for the largest share of multifamily loan acquisitions during the first half of this year, banks – including non-U.S. banks – made a big leap in market share during the first half of 2016, accounting for 38% of multifamily lending, up from 27% for all of 2015.

Looking at just U.S. banks, the share climbed from 24% in 2015 to 34% in the first half of 2016.

While anecdotal evidence from banks’ third-quarter investor conference calls suggest that national and regional U.S. banks are moderating their multifamily lending in 2016 in response to a Comptroller of the Currency report in late 2015 stressing the regulator’s concern over the amount of multifamily lending by the banks, the Fannie Mae report shows that was not the case in the first half of the year.

As a result of increased lending, banks and thrifts saw a net increase in their multifamily holdings of more than $21 billion during the first half of 2016, compared with nearly $18 billion during first half of 2015.

It appears that banks – especially the regional and local banks – have stepped in to fill the void left by the commercial mortgage-backed securities (CMBS) conduits, said Kim Betancourt, director of economics multifamily economics and market research for Fannie Mae.

The share of CMBS multifamily lending has declined over the past few years. The CMBS conduits have struggled to maintain market share since reaching a post-recession peak of 10% in 2014. Their share plummeted to just 2% during the first half of 2016, according to Fannie Mae.

Lending data for the first half of 2016 from the American Council of Life Insurers suggest that life insurers are on track to repeat – if not surpass – last year’s $15.3 billion in multifamily commitments. That was the second highest annual level of multifamily commitments for the life insurer sector, following $16.5 billion in 2013. If the current level of activity continues into the second half of the year, then 2016 could be the biggest year yet for life insurer multifamily commitments.

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