Fannie Mae Off to Hot Start, Freddie Mac Pushing Past Market ‘Disruption’ That Slowed Its First Quarter Production

By John Nelson

Fannie Mae started off the year with a bang, producing $17.4 billion in multifamily financing in the first quarter, up about 38 percent compared to the first quarter of 2016. The quarterly total was also up 20 percent from its fourth-quarter 2016 production.

Compared to its counterpart, Freddie Mac had a slower start to the year, producing $12.7 billion in the first quarter, down about 28 percent from both first-quarter and fourth-quarter 2016.

Hilary Provinse, Fannie Mae’s senior vice president of customer engagement, says the driver of Fannie Mae’s hot start is the increased activity in its green product lines, which incentivize borrowers to perform energy and water efficiency improvements at their properties to qualify for financing with reduced interest rates.

“Fannie Mae is the market leader in green rehab financing,” says Provinse. “In 2016, we did $3.6 billion in green financing volume. In the first quarter of 2017 alone we did $5 billion.”

David Brickman, executive vice president of Freddie Mac’s multifamily business, says that Freddie Mac’s first-quarter production was more affected by the “pause” in the market in late 2016 and early 2017 than Fannie Mae.

“There was a little disruption in the fourth quarter of last year that resulted in the market taking a pause,” explains Brickman. “It was the twin effects of the election and the increase in interest rates. That is not a political statement; the election caused a pause among market participants who were waiting to get clarity in terms of fiscal, tax and regulatory policy. At the same time, rates ran up almost 100 basis points, and that provided borrowers an economic justification to pause and stop and see where things might settle.”

Brickman also says that Freddie Mac didn’t experience the same amount of carryover in loan closings from the fourth quarter that it tallied in previous years. “Every year there’s some degree of carryover. It was lighter this year,” according to Brickman.

Fannie Mae, on the other hand, had about $2 billion in carryover from the fourth quarter of 2016, according to Provinse.

Despite the dip in the first quarter, Brickman expects Freddie Mac to produce $60 billion in multifamily business in 2017, surpassing its 2016 total by about 5 percent.

“The inflows and activity that we see in the market indicate that [growth],” says Brickman. “Today we are seeing a lot more transactional activity in the second quarter that will ultimately result in originations in the third and fourth quarter, both in terms of refinancing and acquisition activity. That gives me the confidence to say that we will likely see growth in year-over-year production.

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