“It’s a lucrative business for them, and they are doing a lot of it for that reason,” said Cheryl Malloy, a senior vice president at the association. Buried in the midst of last quarter’s hemorrhaging — the two mortgage giants reported losses totaling more than $3 billion — were modest earnings related to multifamily housing: $70 million for Fannie Mae and $118 million for Freddie Mac.
Douglas M. Bibby, president of the National Multi Housing Council, a trade group for large apartment companies, said Fannie and Freddie have also played an important part in fostering newer types of rental housing — for the elderly, students and the military.
Though both were created to focus mainly on housing for people with low or moderate incomes, their role is not limited to those segments of the market, as the Archstone deal shows.
Freddie Mac recently announced that it would provide $73.9 million in financing for rehabilitating Linden Plaza, a 1,527-unit income-restricted complex in Brooklyn. But it also agreed recently to buy a $78.3 million loan for a $100 million recapitalization deal for the Pegasus Apartments, a 322-unit luxury building in downtown Los Angeles.
Bolstering their claim that they seek to minimize risk is the low delinquency rate of their multifamily portfolios — 0.04 percent at Freddie Mac and 0.11 percent (up slightly from 0.09 percent in the first quarter) at Fannie Mae.
By contrast, multifamily loans packaged into commercial mortgage-backed securities have a delinquency rate of 1.278 percent — which still sounds low but is higher than any other property type, according to Realpoint L.L.C., a research company in Horsham, Pa.
Officials at Fannie Mae and Freddie Mac say they did not take on undue risk by helping to finance the highly leveraged acquisition by Tishman Speyer and Lehman Brothers of Archstone, the country’s largest apartment landlord (in terms of market and equity capitalization). The company has a well-regarded portfolio in desirable markets, mainly on the East and West Coasts.
But even though rents in Archstone buildings have risen by 5 percent, according to Lehman Brothers, the portfolio has lost value in the current downturn. While apartment REIT shares have risen recently, total returns have declined by 8.56 percent since the Archstone deal was announced.
Lehman Brothers and Tishman Speyer recently said they would take a 25 percent write-down on the investment.
As a private concern, Archstone has been scrambling to shed some of its portfolio to pay down its debt. The company has sold $2.3 billion in assets since the buyout, and has as much as $2 billion worth of properties on the market, said Robert M. White Jr., the president of Real Capital Analytics, a New York research company.
The sales price so far has averaged around $200,000 a square foot, $40,000 less than the average price paid by Tishman Speyer and its financial partner, he said. Archstone’s executives declined to comment.
But Mr. May of Freddie Mac said the agency is protected because its Archstone loans are senior debt, meaning that they would be the last to incur losses. “That deal, from a credit standpoint, was a solid deal for us,” he said. “If they are overleveraged, it won’t be the senior debt that suffers.”