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United States Government Accountability Office: 
GAO: 

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: 

GAO-12-849: 

GAO Highlights: 

Highlights of GAO-12-849, a report to the Chairman, Committee on 
Financial Services, House of Representatives: 

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. 

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

[Refer to PDF for image: stacked vertical bar graph] 

Year: 2005; 
Fannie Mae: $15.6 billion; 17%; 
Freddie Mac: $9.0 billion; 10%; 
Institutional lenders (life insurance companies, commercial mortgage-
backed securities, Federal Housing Administration lenders, other 
lender groups): $67.5 billion; 73%; 
Total: $92.1 billion. 

Year: 2006; 
Fannie Mae: $16.1 billion; 17%; 
Freddie Mac: $9.8 billion; 10%; 
Institutional lenders (life insurance companies, commercial mortgage-
backed securities, Federal Housing Administration lenders, other 
lender groups): $69.8 billion; 73%; 
Total: $95.7 billion. 

Year: 2007; 
Fannie Mae: $19.3 billion; 16%; 
Freddie Mac: $15.3 billion; 13%; 
Institutional lenders (life insurance companies, commercial mortgage-
backed securities, Federal Housing Administration lenders, other 
lender groups): $83.9 billion; 71%; 
Total: $118.5 billion. 

Year: 2008; 
Fannie Mae: $22.4 billion; 35%; 
Freddie Mac: $17.7 billion; 27%; 
Institutional lenders (life insurance companies, commercial mortgage-
backed securities, Federal Housing Administration lenders, other 
lender groups): $24.5 billion; 38%; 
Total: $64.6 billion. 

Year: 2009; 
Fannie Mae: $15.9 billion; 44%; 
Freddie Mac: $15.2 billion; 42%; 
Institutional lenders (life insurance companies, commercial mortgage-
backed securities, Federal Housing Administration lenders, other 
lender groups): $5.4 billion; 15%; 
Total: $36.5 billion. 

Year: 2010; 
Fannie Mae: $16.8 billion; 34%; 
Freddie Mac: $14.0 billion; 29%; 
Institutional lenders (life insurance companies, commercial mortgage-
backed securities, Federal Housing Administration lenders, other 
lender groups): $18.1 billion; 37%; 
Total: $48.9 billion. 

Year: 2011; 
Fannie Mae: $23.0 billion; 30%; 
Freddie Mac: $20.8 billion; 27%; 
Institutional lenders (life insurance companies, commercial mortgage-
backed securities, Federal Housing Administration lenders, other 
lender groups): $33.6 billion; 43%; 
Total: $77.4 billion. 

Source: GAO analysis of Mortgage Bankers Association data. 

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

[End of figure] 

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 [hyperlink, http://www.gao.gov/products/GAO-12-849]. For more 
information, contact William B. Shear at (202) 512-8678 or 
shearw@gao.gov. 

[End of section] 

Contents: 

Letter: 

Background: 

The Enterprises' Multifamily Loan Activities Generally Increased and 
Delinquencies Remained Low: 

Enterprises Increased Their Multifamily Market Share and Generally Met 
Affordable Housing Goals: 

Enterprises' Purchased Multifamily Loans Have Performed Relatively 
Well, but Regulators Identified Issues with Credit Risk Management: 

Agency Comments and Our Evaluation: 

Appendix I: Objectives, Scope, and Methodology: 

Appendix II: Fannie Mae and Freddie Mac's Multifamily Loan Purchases 
in the 25 Largest Metropolitan Areas: 

Appendix III: Additional Data on Fannie Mae and Freddie Mac's 
Multifamily Activities: 

Appendix IV: Enterprises' Multifamily Loan and Property Sizes Compared 
with Other Market Participants: 

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

Appendix VI: GAO Contact and Staff Acknowledgments: 

Tables: 

Table 1: Unpaid Principal Balance of Multifamily Loans That Freddie 
Mac Held for Investment and Held for Sale, 2008-2011: 

Table 2: Principal Balance of Multifamily Loans Purchased by the 
Enterprises and Multifamily Loans Originated by Life Insurance 
Companies and CMBS Lenders, 2005-2011: 

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

Table 4: Enterprises' Target and Performance for Special Affordable 
Multifamily Subgoal, 2001-2009: 

Table 5: Multifamily Contributions to Enterprises' Affordable Housing 
Goals, 2001-2009: 

Table 6: Enterprises' Multifamily Goal Targets and Performance, 2010-
2011: 

Table 7: Median Debt-Service Coverage and LTV Ratios for Multifamily 
Loans Financed by the Enterprises, CMBS Lenders, and Life Insurance 
Companies, 2005-2011: 

Table 8: Percentage of Enterprise, CMBS, and FHA Multifamily Loans 
Financed in 2005-2010 That Were Seriously Delinquent as of December 
31, 2011: 

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: 

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: 

Table 11: Enterprises' Multifamily Risk-Sharing Loans with FHA, 1995-
2011: 

Table 12: Fannie Mae's Multifamily Loan Purchases in the 25 Largest 
Metropolitan Areas, 1994-2011 (Numbers in thousands): 

Table 13: Freddie Mac's Multifamily Loan Purchases in the 25 Largest 
Metropolitan Areas, 1994-2011 (Numbers in thousands): 

Table 14: Fannie Mae and Freddie Mac Multifamily Loan Acquisitions by 
State, 1994-2011: 

Table 15: Fannie Mae and Freddie Mac's Serious Delinquency Rates for 
Multifamily Loans with Debt-Service Coverage Ratios Less Than 1.25: 

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: 

Table 17: Fannie Mae and Freddie Mac's Serious Delinquency Rates for 
Multifamily Loans with LTV Ratios Less Than or Equal to 80 Percent: 

Table 18: Fannie Mae and Freddie Mac's Serious Delinquency Rates for 
Multifamily Loans with LTV Ratios Greater Than 80 Percent: 

Table 19: Fannie Mae and Freddie Mac's Multifamily Administrative 
Costs, 2002-2011: 

Table 20: Median Loan Size and Number of Units for Multifamily Loans 
Financed by the Enterprises, Life Insurance Companies, and CMBS 
Lenders, 2005-2011: 

Table 21: Median Loan Size and Number of Units for Loans Originated by 
Selected Housing Finance Agencies, 2005-2011: 

Table 22: Median Loan Size and Number of Units for Loans Originated by 
Selected Loan Consortiums, 2005-2011: 

Table 23: Median Debt-Service Coverage and LTV Ratios for Loans 
Financed by Selected Housing Finance Agencies, 2005-2011: 

Table 24: Median Debt-Service Coverage Ratios and LTV Ratios for Loans 
Financed by Selected Loan Consortiums, 2005-2011: 

Table 25: Percentage of Selected Housing Finance Agencies' Unpaid 
Principal Balances That Were Seriously Delinquent as of December 2011, 
2005-2011: 

Table 26: Percentage of Loans Seriously Delinquent for Selected Loan 
Consortiums, 2005-2011: 

Figures: 

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

Figure 2: Enterprises' Annual Volume of Retained Multifamily Loans, 
Securitized Multifamily Loans, and Multifamily Bond Credit 
Enhancements, 1994-2011: 

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

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

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

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

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

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

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

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

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

Figure 12: Unpaid Principal Balances of Enterprises' Seriously 
Delinquent Multifamily Loans and Multifamily Portfolio Serious 
Delinquency Rates, 1994-2011: 

Figure 13: Unpaid Principal Balances of Enterprises' Multifamily REO 
Property and Multifamily REO Property as a Percentage of Multifamily 
Book of Business, 1995-2011: 

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

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

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

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

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

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

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

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: 

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: 

[End of section] 

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.[Footnote 1] 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. 

Congress established Fannie Mae and Freddie Mac in 1968 and 1989, 
respectively, as for-profit, shareholder-owned corporations.[Footnote 
2] 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 standards from primary mortgage lenders such as 
banks or savings and loan associations (thrifts).[Footnote 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.[Footnote 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.[Footnote 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: 

* 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.[Footnote 6] To 
assess the reliability of these data, we interviewed 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.[Footnote 7] 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. 

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. Appendix I 
contains additional information on our scope and methodology. 

Background: 

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.[Footnote 8] 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. 

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.[Footnote 9] 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 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.[Footnote 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.[Footnote 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.[Footnote 12] Due to these losses, Freddie Mac 
exited the multifamily market for 3 years starting in 1991.[Footnote 
13] The same 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.[Footnote 14] 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. 

Freddie Mac participates in the multifamily market by underwriting all 
of the loans it purchases.[Footnote 15] 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 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. 
[Footnote 16] Loss-sharing arrangements such as Fannie Mae's DUS 
program and Freddie Mac's K-deal program do not exist in either 
enterprise's single-family business. 

In addition to Fannie Mae and Freddie Mac, the following entities 
participate in the multifamily housing financing marketplace: 

* 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 tax-
exempt 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 
loans--are primary lenders for multifamily housing with less than 50 
units. 

The Enterprises' Multifamily Loan Activities Generally Increased and 
Delinquencies Remained Low: 

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.[Footnote 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. 

Multifamily Loan Purchases Peaked in Recent Years, with Some 
Fluctuation Tied to Housing Goals: 

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.[Footnote 18] Fannie Mae's 
purchases ranged from $6.3 billion in 1994 to $49.8 billion in 2007. 
Freddie Mac's 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: 

[Refer to PDF for image: 2 combined vertical bar and line graphs] 

Fannie Mae multifamily business: 

Year: 1994; 
Number of loans: 1,246; 
Unpaid principal balance: $6.3 billion. 

Year: 1995; 
Number of loans: 4,081; 
Unpaid principal balance: $7.3 billion. 

Year: 1996; 
Number of loans: 1,417; 
Unpaid principal balance: $8.9 billion. 

Year: 1997; 
Number of loans: 1,470; 
Unpaid principal balance: $8.9 billion. 

Year: 1998; 
Number of loans: 7,352; 
Unpaid principal balance: $16.5 billion. 

Year: 1999; 
Number of loans: 1,738; 
Unpaid principal balance: $11.3 billion. 

Year: 2000; 
Number of loans: 1,354; 
Unpaid principal balance: $12.5 billion. 

Year: 2001; 
Number of loans: 4,593; 
Unpaid principal balance: $24.1 billion. 

Year: 2002; 
Number of loans: 7,627; 
Unpaid principal balance: $23.4 billion. 

Year: 2003; 
Number of loans: 18,317; 
Unpaid principal balance: $38.5 billion. 

Year: 2004; 
Number of loans: 4,347; 
Unpaid principal balance: $21.7 billion. 

Year: 2005; 
Number of loans: 8,651; 
Unpaid principal balance: $26.2 billion. 

Year: 2006; 
Number of loans: 5,708; 
Unpaid principal balance: $24.7 billion. 

Year: 2007; 
Number of loans: 14,371; 
Unpaid principal balance: $49.8 billion. 

Year: 2008; 
Number of loans: 6,776; 
Unpaid principal balance: $36.6 billion. 

Year: 2009; 
Number of loans: 2,471; 
Unpaid principal balance: $20.4 billion. 

Year: 2010; 
Number of loans: 2,299; 
Unpaid principal balance: $17.3 billion. 

Year: 2011; 
Number of loans: 2,763; 
Unpaid principal balance: $24.4 billion. 

Freddie Mac multifamily business: 

Year: 1994; 
Number of loans: 175; 
Unpaid principal balance: $0.9 billion. 

Year: 1995; 
Number of loans: 284; 
Unpaid principal balance: $1.8 billion. 

Year: 1996; 
Number of loans: 458 
Unpaid principal balance: $2.5 billion. 

Year: 1997; 
Number of loans: 379; 
Unpaid principal balance: $2.6 billion. 

Year: 1998; 
Number of loans: 665; 
Unpaid principal balance: $5.2 billion. 

Year: 1999; 
Number of loans: 832; 
Unpaid principal balance: $9.5 billion. 

Year: 2000; 
Number of loans: 582; 
Unpaid principal balance: $7.7 billion. 

Year: 2001; 
Number of loans: 3,885; 
Unpaid principal balance: $11.7 billion. 

Year: 2002; 
Number of loans: 3,836; 
Unpaid principal balance: $12.8 billion. 

Year: 2003; 
Number of loans: 13,476; 
Unpaid principal balance: $18.1 billion. 

Year: 2004; 
Number of loans: 3,496; 
Unpaid principal balance: $14.7 billion. 

Year: 2005; 
Number of loans: 972; 
Unpaid principal balance: $12.3 billion. 

Year: 2006; 
Number of loans: 1,044; 
Unpaid principal balance: $14.1 billion. 

Year: 2007; 
Number of loans: 1,914; 
Unpaid principal balance: $24.3 billion. 

Year: 2008; 
Number of loans: 1,819; 
Unpaid principal balance: $25.5 billion. 

Year: 2009; 
Number of loans: 1,038; 
Unpaid principal balance: $17.8 billion. 

Year: 2010; 
Number of loans: 996; 
Unpaid principal balance: $14.9 billion. 

Year: 2011; 
Number of loans: 1,297; 
Unpaid principal balance: $20.2 billion. 

Source: GAO analysis of Fannie Mae and Freddie Mac data. 

Note: All dollar figures are in 2012 dollars. 

[End of figure] 

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 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. 

Fannie Mae Retained a Lower Percentage of Multifamily Loans Than 
Freddie Mac: 

From 1994 through 2011, Fannie Mae retained a lower percentage of its 
annual multifamily loan purchases in portfolio at acquisition than 
Freddie Mac (see figure 2).[Footnote 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. 

Figure 2: Enterprises' Annual Volume of Retained Multifamily Loans, 
Securitized Multifamily Loans, and Multifamily Bond Credit 
Enhancements, 1994-2011: 

[Refer to PDF for image: 2 stacked vertical bar graphs] 

Fannie Mae: 
Unpaid principal balance: 

Year: 1994; 
Retained multifamily loans: $2.1 billion; 
Securitized multifamily loans: $3.3 billion; 
Bond credit enhancements: $0.9 billion. 

Year: 1995; 
Retained multifamily loans: $1.0 billion; 
Securitized multifamily loans: $5.8 billion; 
Bond credit enhancements: $0.6 billion. 

Year: 1996; 
Retained multifamily loans: $0.8 billion; 
Securitized multifamily loans: $7.5 billion; 
Bond credit enhancements: $0.6 billion. 

Year: 1997; 
Retained multifamily loans: $0.6 billion; 
Securitized multifamily loans: $7.6 billion; 
Bond credit enhancements: $0.6 billion. 

Year: 1998; 
Retained multifamily loans: $0.9 billion; 
Securitized multifamily loans: $14.3 billion; 
Bond credit enhancements: $1.4 billion. 

Year: 1999; 
Retained multifamily loans: $1.1 billion; 
Securitized multifamily loans: $8.6 billion; 
Bond credit enhancements: $1.7 billion. 

Year: 2000; 
Retained multifamily loans: $2.1 billion; 
Securitized multifamily loans: $8.1 billion; 
Bond credit enhancements: $2.3 billion. 

Year: 2001; 
Retained multifamily loans: $4.8 billion; 
Securitized multifamily loans: $16.8 billion; 
Bond credit enhancements: $2.6 billion. 

Year: 2002; 
Retained multifamily loans: $5.1 billion; 
Securitized multifamily loans: $14.7 billion; 
Bond credit enhancements: $3.5 billion. 

Year: 2003; 
Retained multifamily loans: $9.1 billion; 
Securitized multifamily loans: $26.8 billion; 
Bond credit enhancements: $2.7 billion. 

Year: 2004; 
Retained multifamily loans: $10.8 billion; 
Securitized multifamily loans: $8.0 billion; 
Bond credit enhancements: $2.8 billion. 

Year: 2005; 
Retained multifamily loans: $13.4 billion; 
Securitized multifamily loans: $10.6 billion; 
Bond credit enhancements: $2.2 billion. 

Year: 2006; 
Retained multifamily loans: $16.6 billion; 
Securitized multifamily loans: $6.2 billion; 
Bond credit enhancements: $1.9 billion. 

Year: 2007; 
Retained multifamily loans: $41.0 billion; 
Securitized multifamily loans: $7.7 billion; 
Bond credit enhancements: $1.2 billion. 

Year: 2008; 
Retained multifamily loans: $29.9 billion; 
Securitized multifamily loans: $6.2 billion; 
Bond credit enhancements: $0.5 billion. 

Year: 2009; 
Retained multifamily loans: $3.6 billion; 
Securitized multifamily loans: $16.8 billion; 
Bond credit enhancements: $0.03 billion. 

Year: 2010; 
Retained multifamily loans: $0.4 billion; 
Securitized multifamily loans: $16.9 billion; 
Bond credit enhancements: $0.03 billion. 

Year: 2011; 
Retained multifamily loans: $0.1 billion; 
Securitized multifamily loans: $24.1 billion; 
Bond credit enhancements: $0.2 billion. 

Freddie Mac: 
Unpaid principal balance: 

Year: 1994; 
Retained multifamily loans: $0.6 billion; 
Securitized multifamily loans: $0.2 billion; 
Bond credit enhancements: $0.1 billion. 

Year: 1995; 
Retained multifamily loans: $1.5 billion; 
Securitized multifamily loans: $0.2 billion; 
Bond credit enhancements: $0.02 billion. 

Year: 1996; 
Retained multifamily loans: $1.9 billion; 
Securitized multifamily loans: $0.7 billion; 
Bond credit enhancements: $0. 

Year: 1997; 
Retained multifamily loans: $2.3 billion; 
Securitized multifamily loans: $0.4 billion; 
Bond credit enhancements: $0. 

Year: 1998; 
Retained multifamily loans: $4.0 billion; 
Securitized multifamily loans: $0.6 billion; 
Bond credit enhancements: $0.6 billion. 

Year: 1999; 
Retained multifamily loans: $7.0 billion; 
Securitized multifamily loans: $1.0 billion; 
Bond credit enhancements: $1.4 billion. 

Year: 2000; 
Retained multifamily loans: $5.6 billion; 
Securitized multifamily loans: $0.6 billion; 
Bond credit enhancements: $1.4 billion. 

Year: 2001; 
Retained multifamily loans: $8.8 billion; 
Securitized multifamily loans: $1.9 billion; 
Bond credit enhancements: $1.0 billion. 

Year: 2002; 
Retained multifamily loans: $8.3 billion; 
Securitized multifamily loans: $2.3 billion; 
Bond credit enhancements: $2.1 billion. 

Year: 2003; 
Retained multifamily loans: $8.1 billion; 
Securitized multifamily loans: $9.3 billion; 
Bond credit enhancements: $0.7 billion. 

Year: 2004; 
Retained multifamily loans: $9.6 billion; 
Securitized multifamily loans: $4.1 billion; 
Bond credit enhancements: $1.0 billion. 

Year: 2005; 
Retained multifamily loans: $10.6 billion; 
Securitized multifamily loans: $0.3 billion; 
Bond credit enhancements: $1.4 billion. 

Year: 2006; 
Retained multifamily loans: $13.0 billion; 
Securitized multifamily loans: $0.1 billion; 
Bond credit enhancements: $0.9 billion. 

Year: 2007; 
Retained multifamily loans: $19.8 billion; 
Securitized multifamily loans: $3.8 billion; 
Bond credit enhancements: $0.8 billion. 

Year: 2008; 
Retained multifamily loans: $20.1 billion; 
Securitized multifamily loans: $0.7 billion; 
Bond credit enhancements: $4.7 billion. 

Year: 2009; 
Retained multifamily loans: $16.7 billion; 
Securitized multifamily loans: $0.7 billion; 
Bond credit enhancements: $0.5 billion. 

Year: 2010; 
Retained multifamily loans: $13.6 billion; 
Securitized multifamily loans: $0.2 billion; 
Bond credit enhancements: $1.1 billion. 

Year: 2011; 
Retained multifamily loans: $19.0 billion; 
Securitized multifamily loans: $0.1 billion; 
Bond credit enhancements: $1.0 billion. 

Source: GAO analysis of Fannie Mae and Freddie Mac data. 

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 K-deal (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. 

[End of figure] 

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 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.[Footnote 20] 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. 

Table 1: Unpaid Principal Balance of Multifamily Loans That Freddie 
Mac Held for Investment and Held for Sale, 2008-2011: 

Acquisition year: 2008; 
Unpaid principal balance of loans held for investment: $19.6 billion; 
Unpaid principal balance of loans held for sale: $497 million. 

Acquisition year: 2009; 
Unpaid principal balance of loans held for investment: $11.84 billion; 
Unpaid principal balance of loans held for sale: $4.826 billion. 

Acquisition year: 2010; 
Unpaid principal balance of loans held for investment: $2.988 billion; 
Unpaid principal balance of loans held for sale: $10.598 billion. 

Acquisition year: 2011; 
Unpaid principal balance of loans held for investment: $2.391 billion; 
Unpaid principal balance of loans held for sale: $16.642 billion. 

Source: GAO analysis of Freddie Mac data. 

Note: All dollar figures are in 2012 dollars. 

[End of table] 

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 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. 

Enterprises Generally Financed Large Multifamily Properties in Large 
Metropolitan Areas: 

Size of Multifamily Properties Financed: 

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 figure 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. 

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

[Refer to PDF for image: 2 combined stacked vertical bar and line 
graphs] 

Fannie Mae multifamily business: 

Year: 1994; 
51+ units, number of loans: 894; 
51+ units, unpaid principal balance: $366,509; 
5-50 units, number of loans: 240; 
5-50 units, unpaid principal balance: $5.4 billion. 

Year: 1995; 
51+ units, number of loans: 750; 
51+ units, unpaid principal balance: $1.9 billion; 
5-50 units, number of loans: 3,156; 
5-50 units, unpaid principal balance: $4.8 billion. 

Year: 1996; 
51+ units, number of loans: 1,148; 
51+ units, unpaid principal balance: $314,740; 
5-50 units, number of loans: 265; 
5-50 units, unpaid principal balance: $8.6 billion. 

Year: 1997; 
51+ units, number of loans: 1,149; 
51+ units, unpaid principal balance: $347.923; 
5-50 units, number of loans: 313; 
5-50 units, unpaid principal balance: $8.5 billion. 

Year: 1998; 
51+ units, number of loans: 1,946; 
51+ units, unpaid principal balance: $2.5 billion; 
5-50 units, number of loans: 5,405; 
5-50 units, unpaid principal balance: $14.1 billion. 

Year: 1999; 
51+ units, number of loans: 1,314; 
51+ units, unpaid principal balance: $549,641; 
5-50 units, number of loans: 422; 
5-50 units, unpaid principal balance: $10.8 billion. 

Year: 2000; 
51+ units, number of loans: 1,120; 
51+ units, unpaid principal balance: $395,177; 
5-50 units, number of loans: 232; 
5-50 units, unpaid principal balance: $12.1 billion. 

Year: 2001; 
51+ units, number of loans: 2,439; 
51+ units, unpaid principal balance: $1.7 billion; 
5-50 units, number of loans: 2,134; 
5-50 units, unpaid principal balance: $21.6 billion. 

Year: 2002; 
51+ units, number of loans: 1,981; 
51+ units, unpaid principal balance: $4.1 billion; 
5-50 units, number of loans: 5,617; 
5-50 units, unpaid principal balance: $17.7 billion. 

Year: 2003; 
51+ units, number of loans: 3,455; 
51+ units, unpaid principal balance: $13.4 billion; 
5-50 units, number of loans: 14,818; 
5-50 units, unpaid principal balance: $23.6 billion. 

Year: 2004; 
51+ units, number of loans: 1,823; 
51+ units, unpaid principal balance: $3.0 billion; 
5-50 units, number of loans: 2,406; 
5-50 units, unpaid principal balance: $15.5 billion. 

Year: 2005; 
51+ units, number of loans: 1,976; 
51+ units, unpaid principal balance: $5.1 billion; 
5-50 units, number of loans: 6,539; 
5-50 units, unpaid principal balance: $18.1 billion. 

Year: 2006; 
51+ units, number of loans: 1,991; 
51+ units, unpaid principal balance: $3.8 billion; 
5-50 units, number of loans: 3,644; 
5-50 units, unpaid principal balance: $19.4 billion. 

Year: 2007; 
51+ units, number of loans: 3,117; 
51+ units, unpaid principal balance: $9.3 billion; 
5-50 units, number of loans: 11,176; 
5-50 units, unpaid principal balance: $36.6 billion. 

Year: 2008; 
51+ units, number of loans: 3,014; 
51+ units, unpaid principal balance: $5.1 billion; 
5-50 units, number of loans: 3,625; 
5-50 units, unpaid principal balance: $23.9 billion. 

Year: 2009; 
51+ units, number of loans: 1,605; 
51+ units, unpaid principal balance: $1.5 billion; 
5-50 units, number of loans: 818; 
5-50 units, unpaid principal balance: $15.4 billion. 

Year: 2010; 
51+ units, number of loans: 1,483; 
51+ units, unpaid principal balance: $1.4 billion; 
5-50 units, number of loans: 788; 
5-50 units, unpaid principal balance: $15.1 billion. 

Year: 2011; 
51+ units, number of loans: 1,973; 
51+ units, unpaid principal balance: $1.5 billion; 
5-50 units, number of loans: 755; 
5-50 units, unpaid principal balance: $2.1 billion. 

Freddie Mac multifamily business: 

Year: 1994; 
51+ units, number of loans: 160; 
51+ units, unpaid principal balance: $179,501; 
5-50 units, number of loans: 15; 
5-50 units, unpaid principal balance: $867,505. 

Year: 1995; 
51+ units, number of loans: 247; 
51+ units, unpaid principal balance: $40,891; 
5-50 units, number of loans: 37; 
5-50 units, unpaid principal balance: $1.7 billion. 

Year: 1996; 
51+ units, number of loans: 394; 
51+ units, unpaid principal balance: $110,412; 
5-50 units, number of loans: 64; 
5-50 units, unpaid principal balance: $1.7 billion. 

Year: 1997; 
51+ units, number of loans: 334; 
51+ units, unpaid principal balance: $76,670; 
5-50 units, number of loans: 45; 
5-50 units, unpaid principal balance: $2.6 billion. 

Year: 1998; 
51+ units, number of loans: 564; 
51+ units, unpaid principal balance: $167,032; 
5-50 units, number of loans: 89; 
5-50 units, unpaid principal balance: $4.6 billion. 

Year: 1999; 
51+ units, number of loans: 738; 
51+ units, unpaid principal balance: $196,334; 
5-50 units, number of loans: 89; 
5-50 units, unpaid principal balance: $9.1 billion. 

Year: 2000; 
51+ units, number of loans: 543; 
51+ units, unpaid principal balance: $61,520; 
5-50 units, number of loans: 34; 
5-50 units, unpaid principal balance: $7.6 billion. 

Year: 2001; 
51+ units, number of loans: 875; 
51+ units, unpaid principal balance: $1.7 billion; 
5-50 units, number of loans: 2,982; 
5-50 units, unpaid principal balance: $10.0 billion. 

Year: 2002; 
51+ units, number of loans: 934; 
51+ units, unpaid principal balance: $2.1 billion; 
5-50 units, number of loans: 2,902; 
5-50 units, unpaid principal balance: $10.7 billion. 

Year: 2003; 
51+ units, number of loans: 1,251; 
51+ units, unpaid principal balance: $7.4 billion; 
5-50 units, number of loans: 12,023; 
5-50 units, unpaid principal balance: $10.6 billion. 

Year: 2004; 
51+ units, number of loans: 1,324; 
51+ units, unpaid principal balance: $1.7 billion; 
5-50 units, number of loans: 2,158; 
5-50 units, unpaid principal balance: $12.8 billion. 

Year: 2005; 
51+ units, number of loans: 916; 
51+ units, unpaid principal balance: $132,413; 
5-50 units, number of loans: 47; 
5-50 units, unpaid principal balance: $12.1 billion. 

Year: 2006; 
51+ units, number of loans: 985; 
51+ units, unpaid principal balance: $101,797; 
5-50 units, number of loans: 37; 
5-50 units, unpaid principal balance: $13.8 billion. 

Year: 2007; 
51+ units, number of loans: 1,750; 
51+ units, unpaid principal balance: $271,307; 
5-50 units, number of loans: 90; 
5-50 units, unpaid principal balance: $23.1 billion. 

Year: 2008; 
51+ units, number of loans: 1,728; 
51+ units, unpaid principal balance: $319,496; 
5-50 units, number of loans: 81; 
5-50 units, unpaid principal balance: $25.1 billion. 

Year: 2009; 
51+ units, number of loans: 992; 
51+ units, unpaid principal balance: $170,320; 
5-50 units, number of loans: 37; 
5-50 units, unpaid principal balance: $17.6 billion. 

Year: 2010; 
51+ units, number of loans: 938; 
51+ units, unpaid principal balance: $264,046; 
5-50 units, number of loans: 54; 
5-50 units, unpaid principal balance: $14.7 billion. 

Year: 2011; 
51+ units, number of loans: 530; 
51+ units, unpaid principal balance: $271,096; 
5-50 units, number of loans: 28; 
5-50 units, unpaid principal balance: $19.8 billion. 

Source: GAO analysis of Fannie Mae and Freddie Mac data. 

Note: All dollar figures are in 2012 dollars. 

[End of figure] 

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 housing goals when they purchased these mortgages.[Footnote 
21] 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. 

Size of Multifamily Loans at Acquisition: 

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 figure 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. 

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

[Refer to PDF for image: 2 stacked vertical bar graphs] 

Fannie Mae: 
Unpaid principal balance: 

Year: 1994; 
$100+ million: $0.2 billion; 
$50 to $100 million: $0.1 billion; 
$5 to $50 million: $3.1 billion; 
0 to $5 million: $2.9 billion. 

Year: 1995; 
$100+ million: $0; 
$50 to $100 million: $0.1 billion; 
$5 to $50 million: $3.2 billion; 
0 to $5 million: $4.1 billion. 

Year: 1996; 
$100+ million: $0; 
$50 to $100 million: $0.1 billion; 
$5 to $50 million: $6.0 billion; 
0 to $5 million: $2.9 billion. 

Year: 1997; 
$100+ million: $0.5 billion; 
$50 to $100 million: $0.2 billion; 
$5 to $50 million: $5.2 billion; 
0 to $5 million: $3.0 billion. 

Year: 1998; 
$100+ million: $0.9 billion; 
$50 to $100 million: $0.3 billion; 
$5 to $50 million: $8.5 billion; 
0 to $5 million: $6.9 billion. 

Year: 1999; 
$100+ million: $0.5 billion; 
$50 to $100 million: $0.5 billion; 
$5 to $50 million: $7.2 billion; 
0 to $5 million: $3.2 billion. 

Year: 1900; 
$100+ million: $1.0 billion; 
$50 to $100 million: $0.9 billion; 
$5 to $50 million: $8.6 billion; 
0 to $5 million: $2.1 billion. 

Year: 2001; 
$100+ million: $1.1 billion; 
$50 to $100 million: $0.8 billion; 
$5 to $50 million: $16.1 billion; 
0 to $5 million: $6.1 billion. 

Year: 2002; 
$100+ million: $1.5 billion; 
$50 to $100 million: $1.2 billion; 
$5 to $50 million: $13.1 billion; 
0 to $5 million: $7.5 billion. 

Year: 2003; 
$100+ million: $0.9 billion; 
$50 to $100 million: $1.5 billion; 
$5 to $50 million: $16.3 billion; 
0 to $5 million: $19.8 billion. 

Year: 2004; 
$100+ million: $2.3 billion; 
$50 to $100 million: $1.5 billion; 
$5 to $50 million: $11.6 billion; 
0 to $5 million: $6.2 billion. 

Year: 2005; 
$100+ million: $1.7 billion; 
$50 to $100 million: $1.9 billion; 
$5 to $50 million: $14.3 billion; 
0 to $5 million: $8.2 billion. 

Year: 2006; 
$100+ million: $2.8 billion; 
$50 to $100 million: $1.8 billion; 
$5 to $50 million: $13.4 billion; 
0 to $5 million: $6.6 billion. 

Year: 2007; 
$100+ million: $17.5 billion; 
$50 to $100 million: $1.4 billion; 
$5 to $50 million: $16.9 billion; 
0 to $5 million: $14.0 billion. 

Year: 2008; 
$100+ million: $6.1 billion; 
$50 to $100 million: $2.3 billion; 
$5 to $50 million: $19.0 billion; 
0 to $5 million: $9.2 billion. 

Year: 2009; 
$100+ million: $3.0 billion; 
$50 to $100 million: $1.6 billion; 
$5 to $50 million: $12.4 billion; 
0 to $5 million: $3.5 billion. 

Year: 2010; 
$100+ million: $0.8 billion; 
$50 to $100 million: $1.5 billion; 
$5 to $50 million: $11.7 billion; 
0 to $5 million: $3.4 billion. 

Year: 2011; 
$100+ million: $2.0 billion; 
$50 to $100 million: $1.8 billion; 
$5 to $50 million: $16.9 billion; 
0 to $5 million: $3.7 billion. 

Freddie Mac
Unpaid principal balance: 

Year: 1994; 
$100+ million: $0; 
$50 to $100 million: $0; 
$5 to $50 million: $0.4 billion; 
0 to $5 million: $0.5 billion. 

Year: 1995; 
$100+ million: $0; 
$50 to $100 million: $0; 
$5 to $50 million: $1.2 billion; 
0 to $5 million: $0.6 billion. 

Year: 1996; 
$100+ million: $0; 
$50 to $100 million: $0; 
$5 to $50 million: $1.4 billion; 
0 to $5 million: $1.1 billion. 

Year: 1997; 
$100+ million: $0.2 billion; 
$50 to $100 million: $0.1 billion; 
$5 to $50 million: $1.5 billion; 
0 to $5 million: $0.8 billion. 

Year: 1998; 
$100+ million: $0; 
$50 to $100 million: $0.2 billion; 
$5 to $50 million: $3.6 billion; 
0 to $5 million: $1.4 billion. 

Year: 1999; 
$100+ million: $0.4 billion; 
$50 to $100 million: $0.6 billion; 
$5 to $50 million: $7.3 billion; 
0 to $5 million: $1.2 billion. 

Year: 2000; 
$100+ million: $0.5 billion; 
$50 to $100 million: $0.9 billion; 
$5 to $50 million: $5.5 billion; 
0 to $5 million: $0.8 billion. 

Year: 2001; 
$100+ million: $0.4 billion; 
$50 to $100 million: $0.6 billion; 
$5 to $50 million: $7.8 billion; 
0 to $5 million: $2.9 billion. 

Year: 2002; 
$100+ million: $0.3 billion; 
$50 to $100 million: $0.2 billion; 
$5 to $50 million: $8.8 billion; 
0 to $5 million: $3.4 billion. 

Year: 2003; 
$100+ million: $0.5 billion; 
$50 to $100 million: $0.6 billion; 
$5 to $50 million: $7.4 billion; 
0 to $5 million: $9.7 billion. 

Year: 2004; 
$100+ million: $0.9 billion; 
$50 to $100 million: $0.5 billion; 
$5 to $50 million: $9.5 billion; 
0 to $5 million: $3.8 billion. 

Year: 2005; 
$100+ million: $0.5 billion; 
$50 to $100 million: $0.9 billion; 
$5 to $50 million: $9.7 billion; 
0 to $5 million: $1.1 billion. 

Year: 2006; 
$100+ million: $0.4 billion; 
$50 to $100 million: $1.6 billion; 
$5 to $50 million: $11.1 billion; 
0 to $5 million: $0.9 billion. 

Year: 2007; 
$100+ million: $1.2 billion; 
$50 to $100 million: $3.0 billion; 
$5 to $50 million: $18.4 billion; 
0 to $5 million: $1.8 billion. 

Year: 2008; 
$100+ million: $1.6 billion; 
$50 to $100 million: $2.6 billion; 
$5 to $50 million: $19.9 billion; 
0 to $5 million: $1.4 billion. 

Year: 2009; 
$100+ million: $2.0 billion; 
$50 to $100 million: $2.1 billion; 
$5 to $50 million: $12.9 billion; 
0 to $5 million: $0.7 billion. 

Year: 2010; 
$100+ million: $1.2 billion; 
$50 to $100 million: $1.0 billion; 
$5 to $50 million: $12.0 billion; 
0 to $5 million: $0.7 billion. 

Year: 2011; 
$100+ million: $0.9 billion; 
$50 to $100 million: $1.8 billion; 
$5 to $50 million: $16.7 billion; 
0 to $5 million: $0.7 billion. 

Source: GAO analysis of Fannie Mae and Freddie Mac data. 

Note: All dollar figures are in 2012 dollars. 

[End of figure] 

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. 

Geographic Location of Multifamily Properties Financed: 

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.[Footnote 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 figure 5). 

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

[Refer to PDF for image: interactive content U.S. map] 

Scroll over MSA areas in the map for more details. [Refer to Appendix 
II for details] 

Map depicts metropolitan areas with the following 2011 loan balances: 

Less than $200 million; 
$200 to less than $400 million; 
$400 to less than $600 million; 
$600 to less than $800 million; 
$800 to less than $1 billion; 
$1 billion or more. 

Dollars in billions: 
1994: $3.96; 
1995: $4.76; 
1996: $5.63; 
1997: $5.28; 
1998: $10.49; 
1999: $7.03; 
2000: $6.98; 
2001: $15.10; 
2002: $15.20; 
2003: $28.05; 
2004: $13.55; 
2005: $16.75; 
2006: $14.51; 
2007: $22.05; 
2008: $18.98; 
2009: $10.92; 
2010: $11.30; 
2011: $14.41. 

Source: GAO analysis of Fannie Mae data; MapInfo (map). 

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 later 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. 

[End of figure] 

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 figure 6). For information on both 
enterprises' purchases by metropolitan area and state, see appendixes 
II and III, respectively. 

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

[Refer to PDF for image: interactive content U.S. map] 

Scroll over MSA areas in the map for more details. [Refer to Appendix 
II for details] 

Map depicts metropolitan areas with the following 2011 loan balances: 

Less than $200 million; 
$200 to less than $400 million; 
$400 to less than $600 million; 
$600 to less than $800 million; 
$800 to less than $1 billion; 
$1 billion or more. 

Dollars in billions: 
1994: $0.65; 
1995: $1.10; 
1996: $1.71; 
1997: $1.81; 
1998: $3.19; 
1999: $6.66; 
2000: $5.03; 
2001: $8.03; 
2002: $9.68; 
2003: $14.23; 
2004: $9.92; 
2005: $7.99; 
2006: $9.03; 
2007: $15.28; 
2008: $16.81; 
2009: $13.43; 
2010: $110.16; 
2011: $12.87. 

Source: GAO analysis of Freddie Mac data; MapInfo (map). 

Note: All dollar figures are in 2012 dollars. 

[End of figure] 

Multifamily Loan Terms: 

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 single-family 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. 

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

[Refer to PDF for image: 2 stacked horizontal bar graphs] 

Fannie Mae multifamily business: 

Year: 1994; 
More than 120 months: $3.1 billion; 
120 months: $1.4 billion; 
More than 60 to less than 120 months: $1.5 billion; 
60 months or less: $0.3 billion. 

Year: 1995; 
More than 120 months: $4.0 billion; 
120 months: $2.2 billion; 
More than 60 to less than 120 months: $0.9 billion; 
60 months or less: $0.2 billion. 

Year: 1996; 
More than 120 months: $2.9 billion; 
120 months: $3.9 billion; 
More than 60 to less than 120 months: $2.0 billion; 
60 months or less: $0.1 billion. 

Year: 1997; 
More than 120 months: $2.8 billion; 
120 months: $4.6 billion; 
More than 60 to less than 120 months: $1.4 billion; 
60 months or less: $0.03 billion. 

Year: 1998; 
More than 120 months: $6.8 billion; 
120 months: $7.9 billion; 
More than 60 to less than 120 months: $1.5 billion; 
60 months or less: $0.3 billion. 

Year: 1999; 
More than 120 months: $3.1 billion; 
120 months: $6.6 billion; 
More than 60 to less than 120 months: $1.0 billion; 
60 months or less: $0.6 billion. 

Year: 2000; 
More than 120 months: $2.6 billion; 
120 months: $5.8 billion; 
More than 60 to less than 120 months: $2.3 billion; 
60 months or less: $1.9 billion. 

Year: 2001; 
More than 120 months: $6.4 billion; 
120 months: $13.3 billion; 
More than 60 to less than 120 months: $1.7 billion; 
60 months or less: $2.8 billion. 

Year: 2002; 
More than 120 months: $8.4 billion; 
120 months: $9.9 billion; 
More than 60 to less than 120 months: $2.1 billion; 
60 months or less: $2.9 billion. 

Year: 2003; 
More than 120 months: $20.0 billion; 
120 months: $10.8 billion; 
More than 60 to less than 120 months: $4.0 billion; 
60 months or less: $3.7 billion. 

Year: 2004; 
More than 120 months: $4.2 billion; 
120 months: $5.0 billion; 
More than 60 to less than 120 months: $6.8 billion; 
60 months or less: $5.7 billion. 

Year: 2005; 
More than 120 months: $6.39293; 
120 months: $8.0114; 
More than 60 to less than 120 months: $7.8031; 
60 months or less: $3.9 billion. 

Year: 2006; 
More than 120 months: $7.7 billion; 
120 months: $10.4 billion; 
More than 60 to less than 120 months: $3.7 billion 
60 months or less: $2.9 billion. 

Year: 2007; 
More than 120 months: $10.7 billion; 
120 months: $18.7 billion; 
More than 60 to less than 120 months: $8.5 billion; 
60 months or less: $12.0 billion. 

Year: 2008; 
More than 120 months: $6.4 billion; 
120 months: $11.0 billion; 
More than 60 to less than 120 months: $9.9 billion; 
60 months or less: $9.4 billion. 

Year: 2009; 
More than 120 months: $1.5 billion; 
120 months: $14.6 billion; 
More than 60 to less than 120 months: $2.4 billion; 
60 months or less: $1.9 billion. 

Year: 2010; 
More than 120 months: $0.6 billion; 
120 months: $12.8 billion; 
More than 60 to less than 120 months: $2.7 billion; 
60 months or less: $1.2 billion. 

Year: 2011; 
More than 120 months: $1.0 billion; 
120 months: $15.1 billion; 
More than 60 to less than 120 months: $6.5 billion; 
60 months or less: $1.9 billion. 

Freddie Mac multifamily business: 

Year: 1994; 
More than 120 months: $0.4 billion; 
120 months: $0.3 billion; 
More than 60 to less than 120 months: $0.2 billion; 
60 months or less: $0.03 billion. 

Year: 1995; 
More than 120 months: $0.6 billion; 
120 months: $1.0 billion; 
More than 60 to less than 120 months: $0.2 billion; 
60 months or less: $0.03 billion. 

Year: 1996; 
More than 120 months: $0.7 billion; 
120 months: $1.4 billion; 
More than 60 to less than 120 months: $0.4 billion; 
60 months or less: $0.01 billion. 

Year: 1997; 
More than 120 months: $0.8 billion; 
120 months: $1.6 billion; 
More than 60 to less than 120 months: $0.2 billion; 
60 months or less: $0.02 billion. 

Year: 1998; 
More than 120 months: $2.1 billion; 
120 months: $2.9 billion; 
More than 60 to less than 120 months: $0.2 billion; 
60 months or less: $0.03 billion. 

Year: 1999; 
More than 120 months: $3.6 billion; 
120 months: $4.4 billion; 
More than 60 to less than 120 months: $1.5 billion; 
60 months or less: $0.04 billion. 

Year: 2000; 
More than 120 months: $2.7 billion; 
120 months: $3.4 billion; 
More than 60 to less than 120 months: $0.9 billion; 
60 months or less: $0.7 billion. 

Year: 2001; 
More than 120 months: $5.2 billion; 
120 months: $5.1 billion; 
More than 60 to less than 120 months: $0.7 billion; 
60 months or less: $0.8 billion. 

Year: 2002; 
More than 120 months: $6.7 billion; 
120 months: $2.7 billion; 
More than 60 to less than 120 months: $2.2 billion; 
60 months or less: $1.2 billion. 

Year: 2003; 
More than 120 months: $12.5 billion; 
120 months: $2.1 billion; 
More than 60 to less than 120 months: $1.9 billion; 
60 months or less: $1.5 billion. 

Year: 2004; 
More than 120 months: $6.1 billion; 
120 months: $4.1 billion; 
More than 60 to less than 120 months: $3.5 billion; 
60 months or less: $1.0 billion. 

Year: 2005; 
More than 120 months: $5.4 billion; 
120 months: $3.9 billion; 
More than 60 to less than 120 months: $2.5 billion; 
60 months or less: $0.5 billion. 

Year: 2006; 
More than 120 months: $8.1 billion; 
120 months: $2.6 billion; 
More than 60 to less than 120 months: $2.8 billion; 
60 months or less: $0.5 billion. 

Year: 2007; 
More than 120 months: $14.3 billion; 
120 months: $1.8 billion; 
More than 60 to less than 120 months: $5.0 billion; 
60 months or less: $2.6 billion. 

Year: 2008; 
More than 120 months: $7.7 billion 
120 months: $2.5 billion; 
More than 60 to less than 120 months: $13.6 billion; 
60 months or less: $1.7 billion. 

Year: 2009; 
More than 120 months: $2.6 billion; 
120 months: $8.3 billion; 
More than 60 to less than 120 months: $5.5 billion; 
60 months or less: $0.4 billion. 

Year: 2010; 
More than 120 months: $1.4 billion; 
120 months: $8.7 billion; 
More than 60 to less than 120 months: $3.5 billion; 
60 months or less: $1.1 billion. 

Year: 2011; 
More than 120 months: $1.1 billion; 
120 months: $5.9 billion; 
More than 60 to less than 120 months: $9.9 billion; 
60 months or less: $2.6 billion. 

Source: GAO analysis of Fannie Mae and Freddie Mac data. 

Note: All dollar figures are in 2012 dollars. 

[End of figure] 

Multifamily Asset Class: 

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 from 1994 through 2011 were traditional rental 
properties.[Footnote 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.[Footnote 24] The enterprises explained 
this occurred because the majority of the multifamily mortgage market 
is concentrated in traditional rental housing. 

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

[Refer to PDF for image: 2 pie-charts] 

Fannie Mae: 

Traditional rental housing: 87.7%; 
Senior housing: 5.5%; 
Cooperative housing: 3.5%; 
Manufactured housing: 1.7%; 
Student housing: 1.6%. 

Freddie Mac: 

Traditional rental housing: 91.6%; 
Senior housing: 4.9%; 
Cooperative housing: 1.2%; 
Student housing: 2.3%. 

Source: GAO analysis of Fannie Mae and Freddie Mac data. 

Note: Manufactured housing is not reflected on the Freddie Mac pie 
chart because it only purchased two of these loans from 1994 through 
2011. 

[End of figure] 

Type of Interest Rate for Multifamily Loans: 

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 figure 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 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: 

[Refer to PDF for image: multiple line graph] 

Year: 1994; 
Freddie Mac Fixed Rate: 100%; 
Freddie Mac ARM: 0; 
Fannie Mae Fixed Rate: 82.16%; 
Fannie Mae ARM: 17.84%. 

Year: 1995; 
Freddie Mac Fixed Rate: 100%; 
Freddie Mac ARM: 0; 
Fannie Mae Fixed Rate: 67.05%; 
Fannie Mae ARM: 32.95%. 

Year: 1996; 
Freddie Mac Fixed Rate: 100%; 
Freddie Mac ARM: 0; 
Fannie Mae Fixed Rate: 88.9%; 
Fannie Mae ARM: 11.01%. 

Year: 1997; 
Freddie Mac Fixed Rate: 100%; 
Freddie Mac ARM: 0; 
Fannie Mae Fixed Rate: 90.22%; 
Fannie Mae ARM: 9.78%. 

Year: 1998; 
Freddie Mac Fixed Rate: 92.63%; 
Freddie Mac ARM: 7.37%; 
Fannie Mae Fixed Rate: 79.82%; 
Fannie Mae ARM: 20.17%. 

Year: 1999; 
Freddie Mac Fixed Rate: 84.3%; 
Freddie Mac ARM: 15.7%; 
Fannie Mae Fixed Rate: 85.67%; 
Fannie Mae ARM: 14.33%. 

Year: 2000; 
Freddie Mac Fixed Rate: 82.78%; 
Freddie Mac ARM: 17.22%; 
Fannie Mae Fixed Rate: 84.93%; 
Fannie Mae ARM: 15.07%. 

Year: 2001; 
Freddie Mac Fixed Rate: 76.24%; 
Freddie Mac ARM: 23.76%; 
Fannie Mae Fixed Rate: 86.54%; 
Fannie Mae ARM: 13.46%. 

Year: 2002; 
Freddie Mac Fixed Rate: 69.68%; 
Freddie Mac ARM: 30.32%; 
Fannie Mae Fixed Rate: 71.65%; 
Fannie Mae ARM: 28.35%. 

Year: 2003; 
Freddie Mac Fixed Rate: 47.2%; 
Freddie Mac ARM: 52.8%; 
Fannie Mae Fixed Rate: 54.29%; 
Fannie Mae ARM: 45.71%. 

Year: 2004; 
Freddie Mac Fixed Rate: 57.29%; 
Freddie Mac ARM: 42.71%; 
Fannie Mae Fixed Rate: 81.6%; 
Fannie Mae ARM: 18.4%. 

Year: 2005; 
Freddie Mac Fixed Rate: 74.37%; 
Freddie Mac ARM: 25.63%; 
Fannie Mae Fixed Rate: 79.38%; 
Fannie Mae ARM: 20.62%. 

Year: 2006; 
Freddie Mac Fixed Rate: 92.45%; 
Freddie Mac ARM: 7.55%; 
Fannie Mae Fixed Rate: 74.82%; 
Fannie Mae ARM: 25.18%. 

Year: 2007; 
Freddie Mac Fixed Rate: 88.16%; 
Freddie Mac ARM: 11.84%; 
Fannie Mae Fixed Rate: 69.94%; 
Fannie Mae ARM: 30.06%. 

Year: 2008; 
Freddie Mac Fixed Rate: 77.54%; 
Freddie Mac ARM: 22.46%; 
Fannie Mae Fixed Rate: 69.38%; 
Fannie Mae ARM: 30.62%. 

Year: 2009; 
Freddie Mac Fixed Rate: 68.07%; 
Freddie Mac ARM: 31.93%; 
Fannie Mae Fixed Rate: 87.45%; 
Fannie Mae ARM: 12.55%. 

Year: 2010; 
Freddie Mac Fixed Rate: 84.2%; 
Freddie Mac ARM: 15.8%; 
Fannie Mae Fixed Rate: 95.87%; 
Fannie Mae ARM: 4.13%. 

Year: 2011; 
Freddie Mac Fixed Rate: 86.72%; 
Freddie Mac ARM: 13.28%; 
Fannie Mae Fixed Rate: 90.68%; 
Fannie Mae ARM: 9.32%. 

Source: GAO analysis of Fannie Mae and Freddie Mac data. 

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

[End of figure] 

Structured Multifamily Finance and Fannie Mae's DUS Program: 

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 Mae much more so than Freddie Mac.[Footnote 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 figure 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. 

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

[Refer to PDF for image: stacked vertical bar graph] 

Year: 1994; 
One loan to one property: $6.3 billion; 
One loan to multiple properties: $0; 
Multiple properties to one loan: $0; 
Multiple properties to multiple loans: $0. 

Year: 1995; 
One loan to one property: $7.2 billion; 
One loan to multiple properties: $0.1 billion; 
Multiple properties to one loan: $0; 
Multiple properties to multiple loans: $0. 

Year: 1996; 
One loan to one property: $8.7 billion; 
One loan to multiple properties: $0.2 billion; 
Multiple properties to one loan: $0; 
Multiple properties to multiple loans: $0.1 billion. 

Year: 1997; 
One loan to one property: $8.4 billion; 
One loan to multiple properties: $0.1 billion; 
Multiple properties to one loan: $0; 
Multiple properties to multiple loans: $0.4 billion. 

Year: 1998; 
One loan to one property: $15.7 billion; 
One loan to multiple properties: $0.1 billion; 
Multiple properties to one loan: $0; 
Multiple properties to multiple loans: $0.7 billion. 

Year: 1999; 
One loan to one property: $10.4 billion; 
One loan to multiple properties: $0.5 billion; 
Multiple properties to one loan: $0; 
Multiple properties to multiple loans: $0.5 billion. 

Year: 2000; 
One loan to one property: $10.9 billion; 
One loan to multiple properties: $0.7 billion; 
Multiple properties to one loan: $0; 
Multiple properties to multiple loans: $0.8 billion. 

Year: 2001; 
One loan to one property: $22.0 billion; 
One loan to multiple properties: $0.4 billion; 
Multiple properties to one loan: $0; 
Multiple properties to multiple loans: $1.6 billion. 

Year: 2002; 
One loan to one property: $20.7 billion; 
One loan to multiple properties: $0.5 billion; 
Multiple properties to one loan: $0; 
Multiple properties to multiple loans: $2.2 billion. 

Year: 2003; 
One loan to one property: $36.2 billion; 
One loan to multiple properties: $0.2 billion; 
Multiple properties to one loan: $0.1 billion; 
Multiple properties to multiple loans: $2.1 billion. 

Year: 2004; 
One loan to one property: $18.5 billion; 
One loan to multiple properties: $1.1 billion; 
Multiple properties to one loan: $0.1 billion; 
Multiple properties to multiple loans: $2.0 billion. 

Year: 2005; 
One loan to one property: $23.2 billion; 
One loan to multiple properties: $0.5 billion; 
Multiple properties to one loan: $0.1 billion; 
Multiple properties to multiple loans: $2.4 billion. 

Year: 2006; 
One loan to one property: $20.5 billion; 
One loan to multiple properties: $0.6 billion; 
Multiple properties to one loan: $0.2 billion; 
Multiple properties to multiple loans: $3.4 billion. 

Year: 2007; 
One loan to one property: $31.7 billion; 
One loan to multiple properties: $10.0 billion; 
Multiple properties to one loan: $0.1 billion; 
Multiple properties to multiple loans: $8.0 billion. 

Year: 2008; 
One loan to one property: $29.3 billion; 
One loan to multiple properties: $2.8 billion; 
Multiple properties to one loan: $0.1 billion; 
Multiple properties to multiple loans: $4.3 billion. 

Year: 2009; 
One loan to one property: $16.7 billion; 
One loan to multiple properties: $0.6 billion; 
Multiple properties to one loan: $0; 
Multiple properties to multiple loans: $3.1 billion. 

Year: 2010; 
One loan to one property: $16.6 billion; 
One loan to multiple properties: $0.3 billion; 
Multiple properties to one loan: $0; 
Multiple properties to multiple loans: $0.5 billion. 

Year: 2011; 
One loan to one property: $22.2 billion; 
One loan to multiple properties: $0.7 billion; 
Multiple properties to one loan: $0; 
Multiple properties to multiple loans: $1.5 billion. 

Source: GAO analysis of Fannie Mae data. 

Note: All dollar figures are in 2012 dollars. 

[End of figure] 

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 figure 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. 

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

[Refer to PDF for image: 2 stacked vertical bar graphs] 

Unpaid principal balance: 

Year: 1994; 
DUS loans: $2.7 billion; 
Non-DUS loans: $3.6 billion. 

Year: 1995; 
DUS loans: $3.4 billion; 
Non-DUS loans: $3.9 billion. 

Year: 1996; 
DUS loans: $6.6 billion; 
Non-DUS loans: $2.3 billion. 

Year: 1997; 
DUS loans: $7.1 billion; 
Non-DUS loans: $1.8 billion. 

Year: 1998; 
DUS loans: $11.7 billion; 
Non-DUS loans: $4.8 billion. 

Year: 1999; 
DUS loans: $10.0 billion; 
Non-DUS loans: $1.4 billion. 

Year: 2000; 
DUS loans: $11.9 billion; 
Non-DUS loans: $0.6 billion. 

Year: 2001; 
DUS loans: $21.7 billion; 
Non-DUS loans: $2.4 billion. 

Year: 2002; 
DUS loans: $18.0 billion; 
Non-DUS loans: $5.4 billion. 

Year: 2003; 
DUS loans: $18.7 billion; 
Non-DUS loans: $19.8 billion. 

Year: 2004; 
DUS loans: $16.6 billion; 
Non-DUS loans: $5.1 billion. 

Year: 2005; 
DUS loans: $19.1 billion; 
Non-DUS loans: $7.1 billion. 

Year: 2006; 
DUS loans: $19.2 billion; 
Non-DUS loans: $5.5 billion. 

Year: 2007; 
DUS loans: $22.8 billion; 
Non-DUS loans: $27.0 billion. 

Year: 2008; 6 billion; 56; 
Non-DUS loans: $8.0 billion. 

Year: 2009; 
DUS loans: $19.3 billion; 
Non-DUS loans: $1.1 billion. 

Year: 2010; 
DUS loans: $16.8 billion; 
Non-DUS loans: $0.6 billion. 

Year: 2011; 
DUS loans: $23.7 billion; 
Non-DUS loans: $0.7 billion. 

Number of multifamily loans: 

Year: 1994; 
DUS loans: 346; 
Non-DUS loans: 900. 

Year: 19995; 
DUS loans: 456; 
Non-DUS loans: 3,625. 

Year: 19996; 
DUS loans: 842; 
Non-DUS loans: 575. 

Year: 19997; 
DUS loans: 924; 
Non-DUS loans: 546. 

Year: 19998; 
DUS loans: 1,438; 
Non-DUS loans: 5,914. 

Year: 19999; 
DUS loans: 1,223; 
Non-DUS loans: 515. 

Year: 2000; 
DUS loans: 1,243; 
Non-DUS loans: 111. 

Year: 2001; 
DUS loans: 2,356; 
Non-DUS loans: 2,237. 

Year: 2002; 
DUS loans: 1,78; 
Non-DUS loans: 5,847. 

Year: 2003; 
DUS loans: 1,995; 
Non-DUS loans: 16,322. 

Year: 2004; 
DUS loans: 1,655; 
Non-DUS loans: 2,692. 

Year: 2005; 
DUS loans: 1,964; 
Non-DUS loans: 6,687. 

Year: 2006; 
DUS loans: 2,072; 
Non-DUS loans: 3,636. 

Year: 2007; 
DUS loans: 2,552; 
Non-DUS loans: 11,819. 

Year: 2008; 
DUS loans: 2,893; 
Non-DUS loans: 3,883. 

Year: 2009; 
DUS loans: 2,074; 
Non-DUS loans: 397. 

Year: 2010; 
DUS loans: 2,08; 
Non-DUS loans: 219. 

Year: 2011; 
DUS loans: 2,54; 
Non-DUS loans: 223. 

Source: GAO analysis of Fannie Mae data. 

Note: All dollar figures are in 2012 dollars. 

[End of figure] 

However, based on total loan counts, non-DUS loans constituted the 
majority of multifamily loans in 10 of the 18 years we reviewed (see 
figure 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). 

Enterprises' Multifamily Serious Delinquency Rates Were Low: 

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 figure 
12).[Footnote 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.[Footnote 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. 

Figure 12: Unpaid Principal Balances of Enterprises' Seriously 
Delinquent Multifamily Loans and Multifamily Portfolio Serious 
Delinquency Rates, 1994-2011: 

[Refer to PDF for image: 2 combined vertical bar and line graphs] 

Fannie Mae: 

Year: 1994; 
Unpaid principal balance: $4.1 million; 
Delinquency rate: 1.21%. 

Year: 1995; 
Unpaid principal balance: $26.5 million; 
Delinquency rate: 0.72%. 

Year: 1996; 
Unpaid principal balance: $26.1 million; 
Delinquency rate: 0.67%. 

Year: 1997; 
Unpaid principal balance: $175.2 million; 
Delinquency rate: 0.44%. 

Year: 1998; 
Unpaid principal balance: $126.5 million; 
Delinquency rate: 0.25%. 

Year: 1999; 
Unpaid principal balance: $74.8 million; 
Delinquency rate: 0.13%. 

Year: 2000; 
Unpaid principal balance: $50.5 million; 
Delinquency rate: 0.08%. 

Year: 2001; 
Unpaid principal balance: $23.1 million; 
Delinquency rate: 0.29%. 

Year: 2002; 
Unpaid principal balance: $80.2 million; 
Delinquency rate: 0.08%. 

Year: 2003; 
Unpaid principal balance: $377.8 million; 
Delinquency rate: 0.29%. 

Year: 2004; 
Unpaid principal balance: $152.9 million; 
Delinquency rate: 0.11%. 

Year: 2005; 
Unpaid principal balance: $422.7 million; 
Delinquency rate: 0.32%. 

Year: 2006; 
Unpaid principal balance: $102.9 million; 
Delinquency rate: 0.08%. 

Year: 2007; 
Unpaid principal balance: $125.1 million; 
Delinquency rate: 0.08%. 

Year: 2008; 
Unpaid principal balance: $525.0 million; 
Delinquency rate: 0.29%. 

Year: 2009; 
Unpaid principal balance: $1.2 billion; 
Delinquency rate: 0.62%. 

Year: 2010; 
Unpaid principal balance: $1.3 billion; 
Delinquency rate: 0.7%. 

Year: 2011; 
Unpaid principal balance: $1.1 billion; 
Delinquency rate: 0.58%. 

Freddie Mac: 

Year: 1994; 
Unpaid principal balance: $0. 

Year: 1995; 
Unpaid principal balance: $0. 

Year: 1996; 
Unpaid principal balance: $1.5 million; 
Delinquency rate: 0.04%. 

Year: 1997; 
Unpaid principal balance: $0. 

Year: 1998; 
Unpaid principal balance: $0. 

Year: 1999; 
Unpaid principal balance: $13.7 million; 
Delinquency rate: 0.09%. 

Year: 2000; 
Unpaid principal balance: $0. 

Year: 2001; 
Unpaid principal balance: $52.1 million; 
Delinquency rate: 0.14%. 

Year: 2002; 
Unpaid principal balance: $59.4 million; 
Delinquency rate: 0.13%. 

Year: 2003; 
Unpaid principal balance: $28.3 million; 
Delinquency rate: 0.05%. 

Year: 2004; 
Unpaid principal balance: $40.7 million; 
Delinquency rate: 0.06%. 

Year: 2005; 
Unpaid principal balance: $2.3 million. 

Year: 2006; 
Unpaid principal balance: $32.4 million; 
Delinquency rate: 0.06%. 

Year: 2007; 
Unpaid principal balance: $11.0 million; 
Delinquency rate: 0.02%. 

Year: 2008; 
Unpaid principal balance: $31.5 million; 
Delinquency rate: 0.03%. 

Year: 2009; 
Unpaid principal balance: $208.9 million; 
Delinquency rate: 0.2%. 

Year: 2010; 
Unpaid principal balance: $293.9 million; 
Delinquency rate: 0.26%. 

Year: 2011; 
Unpaid principal balance: $259.7 million; 
Delinquency rate: 0.22%. 

Source: GAO analysis of Fannie Mae and Freddie Mac data. 

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

[End of figure] 

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 figure 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. 

Figure 13: Unpaid Principal Balances of Enterprises' Multifamily REO 
Property and Multifamily REO Property as a Percentage of Multifamily 
Book of Business, 1995-2011: 

[Refer to PDF for image: illustrated table] 

Fannie Mae: 

Year: 1995; 
Unpaid principal balance: No data; 
Percentage of book doing business: No data. 

Year: 1996; 
Unpaid principal balance: No data; 
Percentage of book doing business: No data. 

Year: 1997; 
Unpaid principal balance: No data; 
Percentage of book doing business: No data. 

Year: 1998; 
Unpaid principal balance: No data; 
Percentage of book doing business: No data. 

Year: 1999; 
Unpaid principal balance: No data; 
Percentage of book doing business: No data. 

Year: 2000; 
Unpaid principal balance: No data; 
Percentage of book doing business: No data. 

Year: 2001; 
Unpaid principal balance: No data; 
Percentage of book doing business: No data. 

Year: 2002; 
Unpaid principal balance: $9 million; 
Percentage of book doing business: 0.01%. 

Year: 2003; 
Unpaid principal balance: $99 million; 
Percentage of book doing business: 0.09%. 

Year: 2004; 
Unpaid principal balance: $151 million; 
Percentage of book doing business: 0.13%. 

Year: 2005; 
Unpaid principal balance: $66 million; 
Percentage of book doing business: 0.05%. 

Year: 2006; 
Unpaid principal balance: $58 million; 
Percentage of book doing business: 0.05%. 

Year: 2007; 
Unpaid principal balance: $47 million; 
Percentage of book doing business: 0.03%. 

Year: 2008; 
Unpaid principal balance: $129 million; 
Percentage of book doing business: 0.07%. 

Year: 2009; 
Unpaid principal balance: $422 million; 
Percentage of book doing business: 0.23%. 

Year: 2010; 
Unpaid principal balance: $1.222 billion; 
Percentage of book doing business: 0.65%. 

Year: 2011; 
Unpaid principal balance: $1.097 billion; 
Percentage of book doing business: 0.56%. 

Freddie Mac: 

Year: 1995; 
Unpaid principal balance: $104 million; 
Percentage of book doing business: 1.560%. 

Year: 1996; 
Unpaid principal balance: $32 million; 
Percentage of book doing business: 0.427%. 

Year: 1997; 
Unpaid principal balance: $12 million; 
Percentage of book doing business: 0.143%. 

Year: 1998; 
Unpaid principal balance: $6 million; 
Percentage of book doing business: 0.054%. 

Year: 1999; 
Unpaid principal balance: $1 million; 
Percentage of book doing business: 0.006%. 

Year: 2000; 
Unpaid principal balance: $2 million; 
Percentage of book doing business: 0.009%. 

Year: 2001; 
Unpaid principal balance: $2 million; 
Percentage of book doing business: 0.007%. 

Year: 2002; 
Unpaid principal balance: $1 million; 
Percentage of book doing business: 0.003%. 

Year: 2003; 
Unpaid principal balance: $39 million; 
Percentage of book doing business: 0.79%. 

Year: 2004; 
Unpaid principal balance: $2 million; 
Percentage of book doing business: 0.004%. 

Year: 2005; 
Unpaid principal balance: $18 million; 
Percentage of book doing business: 0.032%. 

Year: 2006; 
Unpaid principal balance: $10 million; 
Percentage of book doing business: 0.018%. 

Year: 2007; 
Unpaid principal balance: $0; 
Percentage of book doing business: 0.000%. 

Year: 2008; 
Unpaid principal balance: $60 million; 
Percentage of book doing business: 0.068%. 

Year: 2009; 
Unpaid principal balance: $52 million; 
Percentage of book doing business: 0.051%. 

Year: 2010; 
Unpaid principal balance: $171 million; 
Percentage of book doing business: 0.156%. 

Year: 2011; 
Unpaid principal balance: $181 million; 
Percentage of book doing business: 0.154%. 

Sources: Fannie Mae and Freddie Mac data. 

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. 

[End of figure] 

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 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. 

Enterprises' Multifamily Activity Generally Was Profitable: 

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.[Footnote 28] 

Multifamily Net Income: 

Due to differences in the business structures of the enterprises, net 
income figures cannot be directly compared between enterprises. 
[Footnote 29] Fannie Mae's multifamily business reported positive net 
income every year from 2002 through 2011 except for 2008 and 2009 (see 
figure 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.[Footnote 30] Freddie Mac's multifamily business 
reported positive net income every year from 2005 to 2011 except for 
2009. In 2009, Freddie Mac's multifamily business reported losses of 
$3 billion, primarily due to LIHTC write-offs. 

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

[Refer to PDF for image: 2 vertical bar graphs] 

Fannie Mae: 

Year: 2002; 
Net income: $184 million. 

Year: 2003; 
Net income: $286 million. 

Year: 2004; 
Net income: $425 million. 

Year: 2005; 
Net income: $503 million. 

Year: 2006; 
Net income: $338 million. 

Year: 2007; 
Net income: $157 million. 

Year: 2008; 
Net income: -$2.189 billion. 

Year: 2009; 
Net income: -$9.028 billion. 

Year: 2010; 
Net income: $216 million. 

Year: 2011; 
Net income: $583 million. 

Freddie Mac: 

Year: 2005; 
Net income: $371 million. 

Year: 2006; 
Net income: $479 million. 

Year: 2007; 
Net income: $592 million. 

Year: 2008; 
Net income: -$57 million. 

Year: 2009; 
Net income: -$2.952 billion. 

Year: 2010; 
Net income: $965 million. 

Year: 2011; 
Net income: $1.319 million. 

Sources: Fannie Mae and Freddie Mac data. 

Note: Fannie Mae data were not available before 2002, and Freddie Mac 
data were not available before 2005. 

[End of figure] 

Multifamily Net Charge-offs: 

Net multifamily charge-offs increased in recent years, mirroring the 
rise in serious delinquencies shown earlier.[Footnote 31] From 2002 to 
2008, net charge-offs in Fannie Mae's multifamily business segment 
remained at or below $34 million annually (see figure 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. 

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

[Refer to PDF for image: multiple line graph] 

Year: 2002; 
Fannie Mae: $18 million; 
Freddie Mac: -$1 million. 

Year: 2003; 
Fannie Mae: $4 million; 
Freddie Mac: $7 million. 

Year: 2004; 
Fannie Mae: $21 million; 
Freddie Mac: $0. 

Year: 2005; 
Fannie Mae: $26 million; 
Freddie Mac: $8 million. 

Year: 2006; 
Fannie Mae: $16 million; 
Freddie Mac: $5 million. 

Year: 2007; 
Fannie Mae: $5 million; 
Freddie Mac: $3 million. 

Year: 2008; 
Fannie Mae: $34 million; 
Freddie Mac: $8 million. 

Year: 2009; 
Fannie Mae: $162 million; 
Freddie Mac: $21 million. 

Year: 2010; 
Fannie Mae: $446 million; 
Freddie Mac: $103 million. 

Year: 2011; 
Fannie Mae: $374 million; 
Freddie Mac: $82 million. 

Sources: Fannie Mae and Freddie Mac data. 

Note: Fannie Mae data were not available before 2002, and Freddie Mac 
data were not available before 1997. 

[End of figure] 

Multifamily Guarantee Fees: 

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. 

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

[Refer to PDF for image: multiple line graph] 

Year: 2002; 
Fannie Mae: $271 million; 
Freddie Mac: $38 million. 

Year: 2003; 
Fannie Mae: $303 million; 
Freddie Mac: $49 million. 

Year: 2004; 
Fannie Mae: $449 million; 
Freddie Mac: $68 million. 

Year: 2005; 
Fannie Mae: $572 million; 
Freddie Mac: $59 million. 

Year: 2006; 
Fannie Mae: $562 million; 
Freddie Mac: $61 million. 

Year: 2007; 
Fannie Mae: $470 million; 
Freddie Mac: $59 million. 

Year: 2008; 
Fannie Mae: $633 million; 
Freddie Mac: $76 million. 

Year: 2009; 
Fannie Mae: $675 million; 
Freddie Mac: $90 million. 

Year: 2010; 
Fannie Mae: $791 million; 
Freddie Mac: $101 million. 

Year: 2011; 
Fannie Mae: $884 million; 
Freddie Mac: $127 million. 

Sources: Fannie Mae and Freddie Mac data. 

Note: Fannie Mae data were not available before 2002, and Freddie Mac 
data were not available before 2001. 

[End of figure] 

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. 

Enterprises Increased Their Multifamily Market Share and Generally Met 
Affordable Housing Goals: 

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' Multifamily Market Share Has Grown Since the Financial 
Crisis: 

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 figure 17). 

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

[Refer to PDF for image: stacked vertical bar graph] 

Year: 2005; 
Fannie Mae and Freddie Mac[D]: $160.4 billion; 
U.S.-chartered depository institutions: $237.1 billion; 
Private issuers of asset-backed securities: $89.4 billion; 
State and local government[C]: $64.1 billion; 
Ginnie Mae Life mortgage pools: $33.8 billion; 
Life insurance companies: $42.4 billion; 
Other[B]: $23.0 billion; 
Federal government[A]: $14.9 billion; 
Fannie Mae and Freddie Mac percentage of debt outstanding: 24%. 

Year: 2006; 
Fannie Mae and Freddie Mac[D]: $158.0 billion; 
U.S.-chartered depository institutions: $253.3 billion; 
Private issuers of asset-backed securities: $102.5 billion; 
State and local government[C]: $65.9 billion; 
Ginnie Mae Life mortgage pools: $36.1 billion; 
Life insurance companies: $46.1 billion; 
Other[B]: $24.9 billion; 
Federal government[A]: $14.8 billion; 
Fannie Mae and Freddie Mac percentage of debt outstanding: 23%. 

Year: 2007; 
Fannie Mae and Freddie Mac[D]: $198.1 billion; 
U.S.-chartered depository institutions: $261.1 billion; 
Private issuers of asset-backed securities: $124.0 billion; 
State and local government[C]: $70.1 billion; 
Ginnie Mae Life mortgage pools: $37.6 billion; 
Life insurance companies: $51.8 billion; 
Other[B]: $27.4 billion; 
Federal government[A]: $14.4 billion; 
Fannie Mae and Freddie Mac percentage of debt outstanding: 25%. 

Year: 2008; 
Fannie Mae and Freddie Mac[D]: $243.5 billion; 
U.S.-chartered depository institutions: $276.0 billion; 
Private issuers of asset-backed securities: $113.2 billion; 
State and local government[C]: $68.5 billion; 
Ginnie Mae Life mortgage pools: $39.4 billion; 
Life insurance companies: $51.8 billion; 
Other[B]: $30.7 billion; 
Federal government[A]: $14.5 billion; 
Fannie Mae and Freddie Mac percentage of debt outstanding: 29%. 

Year: 2009; 
Fannie Mae and Freddie Mac[D]: $266.6 billion; 
U.S.-chartered depository institutions: $267.0 billion; 
Private issuers of asset-backed securities: $107.3 billion; 
State and local government[C]: $71.9 billion; 
Ginnie Mae Life mortgage pools: $57.8 billion; 
Life insurance companies: $48.5 billion; 
Other[B]: $27.4 billion; 
Federal government[A]: $14.7 billion; 
Fannie Mae and Freddie Mac percentage of debt outstanding: 31%. 

Year: 2010; 
Fannie Mae and Freddie Mac[D]: $271.1 billion; 
U.S.-chartered depository institutions: $254.9 billion; 
Private issuers of asset-backed securities: $98.7 billion; 
State and local government[C]: $73.7 billion; 
Ginnie Mae Life mortgage pools: $52.2 billion; 
Life insurance companies: $47.2 billion; 
Other[B]: $25.4 billion; 
Federal government[A]: $14.4 billion; 
Fannie Mae and Freddie Mac percentage of debt outstanding: 32%. 

Year: 2011; 
Fannie Mae and Freddie Mac[D]: $285.1 billion; 
U.S.-chartered depository institutions: $248.33 billion; 
Private issuers of asset-backed securities: $90.6 billion; 
State and local government[C]: $72.4 billion; 
Ginnie Mae Life mortgage pools: $60.5 billion; 
Life insurance companies: $49.6 billion; 
Other[B]: $23.7 billion; 
Federal government[A]: $14.1 billion; 
Fannie Mae and Freddie Mac percentage of debt outstanding: 34%. 

Source: GAO analysis of Federal Reserve data. 

[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. 

[End of figure] 

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 figure 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 on MBA's annual survey of large institutional lenders, which 
it defines as firms with a dedicated commercial/multifamily 
origination platform.[Footnote 32] 

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

[Refer to PDF for image: stacked vertical bar graph] 

Year: 2005; 
Fannie Mae: $15.6 billion; 17%; 
Freddie Mac: $9.0 billion; 10%; 
Institutional lenders (life insurance companies, commercial mortgage-
backed securities, Federal Housing Administration lenders, other 
lender groups): $67.5 billion; 73%; 
Total: $92.1 billion. 

Year: 2006; 
Fannie Mae: $16.1 billion; 17%; 
Freddie Mac: $9.8 billion; 10%; 
Institutional lenders (life insurance companies, commercial mortgage-
backed securities, Federal Housing Administration lenders, other 
lender groups): $69.8 billion; 73%; 
Total: $95.7 billion. 

Year: 2007; 
Fannie Mae: $19.3 billion; 16%; 
Freddie Mac: $15.3 billion; 13%; 
Institutional lenders (life insurance companies, commercial mortgage-
backed securities, Federal Housing Administration lenders, other 
lender groups): $83.9 billion; 71%; 
Total: $118.5 billion. 

Year: 2008; 
Fannie Mae: $22.4 billion; 35%; 
Freddie Mac: $17.7 billion; 27%; 
Institutional lenders (life insurance companies, commercial mortgage-
backed securities, Federal Housing Administration lenders, other 
lender groups): $24.5 billion; 38%; 
Total: $64.6 billion. 

Year: 2009; 
Fannie Mae: $15.9 billion; 44%; 
Freddie Mac: $15.2 billion; 42%; 
Institutional lenders (life insurance companies, commercial mortgage-
backed securities, Federal Housing Administration lenders, other 
lender groups): $5.4 billion; 15%; 
Total: $36.5 billion. 

Year: 2010; 
Fannie Mae: $16.8 billion; 34%; 
Freddie Mac: $14.0 billion; 29%; 
Institutional lenders (life insurance companies, commercial mortgage-
backed securities, Federal Housing Administration lenders, other 
lender groups): $18.1 billion; 37%; 
Total: $48.9 billion. 

Year: 2011; 
Fannie Mae: $23.0 billion; 30%; 
Freddie Mac: $20.8 billion; 27%; 
Institutional lenders (life insurance companies, commercial mortgage-
backed securities, Federal Housing Administration lenders, other 
lender groups): $33.6 billion; 43%; 
Total: $77.4 billion. 

Source: GAO analysis of MBA data. 

Note: According to MBA, institutional lenders do not include small 
banks and thrifts. Percentages may not add to 100 because of rounding. 

[End of figure] 

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 
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).[Footnote 33] The data from ACLI and Trepp also 
showed that life insurance companies and CMBS lenders started 
reentering the market in 2010. 

Table 2: Principal Balance of Multifamily Loans Purchased by the 
Enterprises and Multifamily Loans Originated by Life Insurance 
Companies and CMBS Lenders, 2005-2011: 

Acquisition or origination year: 2005; 
Fannie Mae[A]: $22.844 billion; 
Freddie Mac[A]: $10.768 billion; 
Life insurance companies[B]: $7.636 billion; 
CMBS lenders[B]: $21.837 billion. 

Acquisition or origination year: 2006; 
Fannie Mae[A]: $22.233 billion; 
Freddie Mac[A]: $12.669 billion; 
Life insurance companies[B]: $11.167 billion; 
CMBS lenders[B]: $27.399 billion. 

Acquisition or origination year: 2007; 
Fannie Mae[A]: $46.297 billion; 
Freddie Mac[A]: $22.644 billion; 
Life insurance companies[B]: $9.709 billion; 
CMBS lenders[B]: $32.750 billion. 

Acquisition or origination year: 2008; 
Fannie Mae[A]: $34.691 billion; 
Freddie Mac[A]: $24.165 billion; 
Life insurance companies[B]: $2.872 billion; 
CMBS lenders[B]: $1.087 billion. 

Acquisition or origination year: 2009; 
Fannie Mae[A]: $19.537 billion; 
Freddie Mac[A]: 17.063 billion; 
Life insurance companies[B]: $564 million; 
CMBS lenders[B]: $0. 

Acquisition or origination year: 2010; 
Fannie Mae[A]: $16.83 billion2; 
Freddie Mac[A]: $14.508 billion; 
Life insurance companies[B]: $4.651 billion; 
CMBS lenders[B]: $380 million. 

Acquisition or origination year: 2011; 
Fannie Mae[A]: $24.177 billion; 
Freddie Mac[A]: $19.993 billion; 
Life insurance companies[B]: $11.136 billion; 
CMBS lenders[B]: $1.319 billion. 

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. 

[End of table] 

Few Studies Examined Enterprises' Role in Multifamily Market but Most 
Noted Positive Effects: 

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. 
[Footnote 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.[Footnote 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).[Footnote 36] 

Most mortgage finance and housing policy groups with whom we spoke 
generally agreed that the enterprises had provided liquidity and 
counter-cyclical 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."[Footnote 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.[Footnote 38] 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. 

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 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 figure 19). 

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

[Refer to PDF for image: pie-chart] 

1-4 units: 52.3%; 
5-49 units: 31.4%; 
50 units or more: 11.6%; 
Mobile home, boat, RV, van, etc.: 4.7%. 

Source: GAO analysis of American Community Survey data. 

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

[End of figure] 

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 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.[Footnote 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 low-income or very low-income rental units. 
[Footnote 40] 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 appendix IV.) 

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 financing markets exist for office, retail, and 
industrial properties."[Footnote 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.[Footnote 42] 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. 

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.[Footnote 43] 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. 

Currently, the enterprises compose the largest share of the 
multifamily market as they and other federal entities compose most of 
the single-family 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. 

Enterprises' Multifamily Activities Are Important to Meeting 
Affordable Housing Goal Requirements: 

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. 

HUD and FHFA Roles and Responsibilities: 

The Safety and Soundness Act required the enterprises to meet annual 
numeric goals for the purchase of mortgages serving targeted groups. 
[Footnote 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).[Footnote 45]The special affordable goal targeted 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.[Footnote 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. 

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

[Refer to PDF for image: timeline] 

1992: 
Safety and Soundness Act set targets for the affordable housing goals 
for 1993-1994. HUD subsequently extended the 1994 goals for both 
enterprises into through 1995.  

1995: 
HUD published the housing goals for 1996-1999, which were subsequently 
extended to 2000.  

1997: 
HUD established the special affordable multifamily subgoal through 
2008. 

2000: 
HUD published the housing goals for 2001-2003 (extended to 2004). 
"Bonus points" were applied in 2001-2003 for goal-qualifying units 
financed by enterprise mortgage purchases of small (5-50 unit) 
multifamily properties.  

2004: 
HUD made its final revision to the housing goals, which covered 2005-
2008.  

2008: 
The Housing and Economic Recovery Act of 2008 (HERA) transferred the 
housing goal oversight function to FHFA.  

2009: 
In 2009, FHFA issued a final rule that adopted existing housing goals 
provisions, and revised the 2008 goal levels in light of market 
conditions.  

2010: 
FHFA issued a final rule that established separate goals for 
multifamily and single-family mortgage purchases. 

2012: 
FHFA published proposed goals for 2012-2014 in June 2012.         

Source: GAO analysis of HUD and FHFA documents. 

[End of figure] 

HUD oversaw the enterprises' compliance with the housing goals through 
2008. On July 30, 2008, HERA transferred the housing goal oversight 
function to FHFA.[Footnote 47] 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 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. 
[Footnote 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 [Footnote 49] Beginning in 2010, FHFA, implementing HERA, 
made significant changes to the goals framework, such as separating 
the goals for multifamily and single-family mortgage purchases. 
[Footnote 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.[Footnote 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. 
[Footnote 52] FHFA is proposing to continue the existing structure, 
with revised single-family and multifamily housing goal benchmark 
levels for 2012, 2013, and 2014. 

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.[Footnote 53] The enterprises submit 
quarterly reports to FHFA on goal performance that include loan-level 
data, as well as an annual report at the end of each year.[Footnote 
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.[Footnote 
55] 

Enterprises' Goal Performance: 

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.[Footnote 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 goals-qualifying, 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. 

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

Year: 2001; 
Low-and moderate-income goal: 
Goal: 50%; 
Fannie Mae: 51.5%; 
Freddie Mac: 53.2%; 
Special affordable goal: 
Goal: 20%; 
Fannie Mae: 21.6%; 
Freddie Mac: 22.6%; 
Underserved areas goal: 
Goal: 31%; 
Fannie Mae: 32.6%; 
Freddie Mac: 31.7%. 

Year: 2002; 
Low-and moderate-income goal: 
Goal: 50%; 
Fannie Mae: 51.8%; 
Freddie Mac: 50.3%; 
Special affordable goal: 
Goal: 20%; 
Fannie Mae: 21.4%; 
Freddie Mac: 20.5%; 
Underserved areas goal: 
Goal: 31%; 
Fannie Mae: 32.8%; 
Freddie Mac: 31%. 

Year: 2003; 
Low-and moderate-income goal: 
Goal: 50%; 
Fannie Mae: 52.3%; 
Freddie Mac: 51.2%; 
Special affordable goal: 
Goal: 20%; 
Fannie Mae: 21.2%; 
Freddie Mac: 21.4%; 
Underserved areas goal: 
Goal: 31%; 
Fannie Mae: 32.1%; 
Freddie Mac: 32.7%. 

Year: 2004; 
Low-and moderate-income goal: 
Goal: 50%; 
Fannie Mae: 53.4%; 
Freddie Mac: 51.6%; 
Special affordable goal: 
Goal: 20%; 
Fannie Mae: 23.6%; 
Freddie Mac: 22.7%; 
Underserved areas goal: 
Goal: 31%; 
Fannie Mae: 33.5%; 
Freddie Mac: 32.3%. 

Year: 2005; 
Low-and moderate-income goal: 
Goal: 52%; 
Fannie Mae: 55.1%; 
Freddie Mac: 54%; 
Special affordable goal: 
Goal: 22%; 
Fannie Mae: 26.3%; 
Freddie Mac: 24.3%; 
Underserved areas goal: 
Goal: 37%; 
Fannie Mae: 41.4%; 
Freddie Mac: 42.3%. 

Year: 2006; 
Low-and moderate-income goal: 
Goal: 53%; 
Fannie Mae: 56.9%; 
Freddie Mac: 55.9%; 
Special affordable goal: 
Goal: 23%; 
Fannie Mae: 27.8%; 
Freddie Mac: 26.4%; 
Underserved areas goal: 
Goal: 38%; 
Fannie Mae: 43.6%; 
Freddie Mac: 42.7%. 

Year: 2007; 
Low-and moderate-income goal: 
Goal: 55%; 
Fannie Mae: 55.5%; 
Freddie Mac: 56.1%; 
Special affordable goal: 
Goal: 25%; 
Fannie Mae: 26.8%; 
Freddie Mac: 25.8%; 
Underserved areas goal: 
Goal: 38%; 
Fannie Mae: 43.4%; 
Freddie Mac: 43.1%. 

Year: 2008[A]; 
Low-and moderate-income goal: 
Goal: 56%; 
Fannie Mae: 53.7%; 
Freddie Mac: 51.5%; 
Special affordable goal: 
Goal: 27%; 
Fannie Mae: 26.4%; 
Freddie Mac: 23.1%; 
Underserved areas goal: 
Goal: 39%; 
Fannie Mae: 39.4%; 
Freddie Mac: 37.7%. 

Year: 2009[B]; 
Low-and moderate-income goal: 
Goal: 43%; 
Fannie Mae: 47.6%; 
Freddie Mac: 44.7%; 
Special affordable goal: 
Goal: 18%; 
Fannie Mae: 20.7%; 
Freddie Mac: 17.7%; 
Underserved areas goal: 
Goal: 32%; 
Fannie Mae: 28.8%; 
Freddie Mac: 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. 

[End of table] 

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.[Footnote 57] 

Table 4: Enterprises' Target and Performance for Special Affordable 
Multifamily Subgoal, 2001-2009: 

Year: 2001; 
Fannie Mae: Goal: $2.85 billion; 
Fannie Mae: Performance: $7.36 billion; 
Freddie Mac: Goal: $2.11 billion; 
Freddie Mac: Performance: $4.65 billion. 

Year: 2002; 
Fannie Mae: Goal: $2.85 billion; 
Fannie Mae: Performance: $7.57 billion; 
Freddie Mac: Goal: $2.11 billion; 
Freddie Mac: Performance: $5.22 billion. 

Year: 2003; 
Fannie Mae: Goal: $2.85 billion; 
Fannie Mae: Performance: $12.23 billion; 
Freddie Mac: Goal: $2.11 billion; 
Freddie Mac: Performance: $8.79 billion. 

Year: 2004; 
Fannie Mae: Goal: $2.85 billion; 
Fannie Mae: Performance: $7.32 billion; 
Freddie Mac: Goal: $2.11 billion; 
Freddie Mac: Performance: $7.77 billion. 

Year: 2005; 
Fannie Mae: Goal: $5.49 billion; 
Fannie Mae: Performance: $10.39 billion; 
Freddie Mac: Goal: $3.92 billion; 
Freddie Mac: Performance: $12.35 billion. 

Year: 2006; 
Fannie Mae: Goal: $5.49 billion; 
Fannie Mae: Performance: $13.31 billion; 
Freddie Mac: Goal: $3.92 billion; 
Freddie Mac: Performance: $13.58 billion. 

Year: 2007; 
Fannie Mae: Goal: $5.49 billion; 
Fannie Mae: Performance: $19.84 billion; 
Freddie Mac: Goal: $3.92 billion; 
Freddie Mac: Performance: $15.12 billion. 

Year: 2008; 
Fannie Mae: Goal: $5.49 billion; 
Fannie Mae: Performance: $13.31 billion; 
Freddie Mac: Goal: $3.92 billion; 
Freddie Mac: Performance: $7.49 billion. 

Year: 2009; 
Fannie Mae: Goal: $6.56 billion; 
Fannie Mae: Performance: $6.42 billion; 
Freddie Mac: Goal: $4.60 billion; 
Freddie Mac: Performance: $3.69 billion. 

Source: FHFA. 

[End of table] 

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).[Footnote 58] 

Table 5: Multifamily Contributions to Enterprises' Affordable Housing 
Goals, 2001-2009: 

Year: 2001; 
Percentage of enterprises' total business that was multifamily 
business: 2.0%; 
Percentage of units that qualified for each goal that were financed by 
multifamily mortgages: 
Low-and moderate-income goal: 23%; 
Underserved areas goal: 19%; 
Special affordable goal: 32%. 

Year: 2002; 
Percentage of enterprises' total business that was multifamily 
business: 1.5%; 
Percentage of units that qualified for each goal that were financed by 
multifamily mortgages: 
Low-and moderate-income goal: 18%; 
Underserved areas goal: 15%; 
Special affordable goal: 24%. 

Year: 2003; 
Percentage of enterprises' total business that was multifamily 
business: 1.7%; 
Percentage of units that qualified for each goal that were financed by 
multifamily mortgages: 
Low-and moderate-income goal: 22%; 
Underserved areas goal: 22%; 
Special affordable goal: 29%. 

Year: 2004; 
Percentage of enterprises' total business that was multifamily 
business: 3.0%; 
Percentage of units that qualified for each goal that were financed by 
multifamily mortgages: 
Low-and moderate-income goal: 21%; 
Underserved areas goal: 17%; 
Special affordable goal: 29%. 

Year: 2005; 
Percentage of enterprises' total business that was multifamily 
business: 3.6%; 
Percentage of units that qualified for each goal that were financed by 
multifamily mortgages: 
Low-and moderate-income goal: 22%; 
Underserved areas goal: 18%; 
Special affordable goal: 31%. 

Year: 2006; 
Percentage of enterprises' total business that was multifamily 
business: 4.8%; 
Percentage of units that qualified for each goal that were financed by 
multifamily mortgages: 
Low-and moderate-income goal: 27%; 
Underserved areas goal: 22%; 
Special affordable goal: 38%. 

Year: 2007; 
Percentage of enterprises' total business that was multifamily 
business: 7.2%; 
Percentage of units that qualified for each goal that were financed by 
multifamily mortgages: 
Low-and moderate-income goal: 33%; 
Underserved areas goal: 27%; 
Special affordable goal: 41%. 

Year: 2008; 
Percentage of enterprises' total business that was multifamily 
business: 4.5%; 
Percentage of units that qualified for each goal that were financed by 
multifamily mortgages: 
Low-and moderate-income goal: 32%; 
Underserved areas goal: 27%; 
Special affordable goal: 39%. 

Year: 2009; 
Percentage of enterprises' total business that was multifamily 
business: 2.8%; 
Percentage of units that qualified for each goal that were financed by 
multifamily mortgages: 
Low-and moderate-income goal: 18%; 
Underserved areas goal: 17%; 
Special affordable goal: 22%. 

Source: GAO analysis of FHFA data. 

[End of table] 

For 2010, FHFA established two specific multifamily goals. The low-
income 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). 

Table 6: Enterprises' Multifamily Goal Targets and Performance, 2010-
2011: 

Year: 2010; 
Low-income multifamily goal (units): 
Fannie Mae: Goal: 177,750; 
Fannie Mae: Performance: 214,997; 
Freddie Mac: Goal: 161,250; 
Freddie Mac: Performance: 161,500; 
Very low-income multifamily goal (units): 
Fannie Mae: Goal: 42,750; 
Fannie Mae: Performance: 53,908; 
Freddie Mac: Goal: 21,000; 
Freddie Mac: Performance: 29,656. 

Year: 2011; 
Low-income multifamily goal (units): 
Fannie Mae: Goal: 177,750; 
Fannie Mae: Performance: 301,224; 
Freddie Mac: Goal: 161,250; 
Freddie Mac: Performance: 229,001;
Very low-income multifamily goal (units): 
Fannie Mae: Goal: 42,750; 
Fannie Mae: Performance: 84,244; 
Freddie Mac: Goal: 21,000; 
Freddie Mac: Performance: 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. 

[End of table] 

Enterprises' Purchased Multifamily Loans Have Performed Relatively 
Well, but Regulators Identified Issues with Credit Risk Management: 

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.[Footnote 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. 

Enterprises' Multifamily Underwriting Standards and Serious 
Delinquency Rates Compared Favorably with Those of Other Sources of 
Multifamily Credit: 

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.[Footnote 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.[Footnote 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.[Footnote 62] 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. 

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: 2005; 
Median debt-service coverage ratio: 
Fannie Mae: 1.40; 
Freddie Mac: 1.55; 
CMBS lenders: 1.33; 
Life insurance companies: 1.55; 
Median LTV ratio: 
Fannie Mae: 62.00; 
Freddie Mac: 75.00; 
CMBS lenders: 74.80; 
Life insurance companies: 69.53. 

Acquisition or origination year: 2006; 
Median debt-service coverage ratio: 
Fannie Mae: 1.35; 
Freddie Mac: 1.48; 
CMBS lenders: 1.25; 
Life insurance companies: 1.37; 
Median LTV ratio: 
Fannie Mae: 60.00; 
Freddie Mac: 70.91; 
CMBS lenders: 73.90; 
Life insurance companies: 68.49. 

Acquisition or origination year: 2007; 
Median debt-service coverage ratio: 
Fannie Mae: 1.22; 
Freddie Mac: 1.39; 
CMBS lenders: 1.25; 
Life insurance companies: 1.36; 
Median LTV ratio: 
Fannie Mae: 55.00; 
Freddie Mac: 72.00; 
CMBS lenders: 74.87; 
Life insurance companies: 67.48. 

Acquisition or origination year: 2008; 
Median debt-service coverage ratio: 
Fannie Mae: 1.35; 
Freddie Mac: 1.45; 
CMBS lenders: 1.22; 
Life insurance companies: 1.57; 
Median LTV ratio: 
Fannie Mae: 64.00; 
Freddie Mac: 71.84; 
CMBS lenders: 75.00; 
Life insurance companies: 59.59. 

Acquisition or origination year: 2009; 
Median debt-service coverage ratio: 
Fannie Mae: 1.36; 
Freddie Mac: 1.57; 
CMBS lenders: N/A; 
Life insurance companies: 1.34; 
Median LTV ratio: 
Fannie Mae: 65.00; 
Freddie Mac: 70.00; 
CMBS lenders: N/A; 
Life insurance companies: 66.75. 

Acquisition or origination year: 2010; 
Median debt-service coverage ratio: 
Fannie Mae: 1.44; 
Freddie Mac: 1.55; 
CMBS lenders: 1.41; 
Life insurance companies: 1.56; 
Median LTV ratio: 
Fannie Mae: 65.00; 
Freddie Mac: 71.69; 
CMBS lenders: 63.94; 
Life insurance companies: 66.32. 

Acquisition or origination year: 2011; 
Median debt-service coverage ratio: 
Fannie Mae: 1.42; 
Freddie Mac: 1.63; 
CMBS lenders: 1.40; 
Life insurance companies: 1.66; 
Median LTV ratio: 
Fannie Mae: 65.00; 
Freddie Mac: 70.23; 
CMBS lenders: 69.60; 
Life insurance companies: 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. 

[End of table] 

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.[Footnote 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.[Footnote 64] The second had ratios that were higher than 
Fannie Mae, but lower than Freddie Mac in 3 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.[Footnote 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. 

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: 2005; 
Fannie Mae: 0.73%; 
Freddie Mac: 0.20%; 
CMBS lenders: 5.60%; 
FHA lenders: 1.19%. 

Acquisition or origination year: 2006; 
Fannie Mae: 0.66%; 
Freddie Mac: 0.25%; 
CMBS lenders: 13.63%; 
FHA lenders: 0.66%. 

Acquisition or origination year: 2007; 
Fannie Mae: 0.89%; 
Freddie Mac: 0.74%; 
CMBS lenders: 23.94%; 
FHA lenders: 0.54%. 

Acquisition or origination year: 2008; 
Fannie Mae: 1.12%; 
Freddie Mac: 0.09%; 
CMBS lenders: 4.68%; 
FHA lenders: 2.74%. 

Acquisition or origination year: 2009; 
Fannie Mae: 0.05%; 
Freddie Mac: 0.00%; 
CMBS lenders: N/A; 
FHA lenders: 5.15%. 

Acquisition or origination year: 2010; 
Fannie Mae: 0.04%; 
Freddie Mac: 0.00%; 
CMBS lenders: 0.00%; 
FHA lenders: 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. 

[End of table] 

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.[Footnote 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. 

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: 2005; 
60 days or more delinquent: Fannie Mae: 0.32%; 
60 days or more delinquent: Freddie Mac: 0.00%; 
90 days or more delinquent[A]: FDIC-insured institutions: 0.25%. 

Year end: 2006; 
60 days or more delinquent: Fannie Mae: 0.08%; 
60 days or more delinquent: Freddie Mac: 0.06%; 
90 days or more delinquent[A]: FDIC-insured institutions: 0.53%. 

Year end: 2007; 
60 days or more delinquent: Fannie Mae: 0.08%; 
60 days or more delinquent: Freddie Mac: 0.02%; 
90 days or more delinquent[A]: FDIC-insured institutions: 0.76%. 

Year end: 2008; 
60 days or more delinquent: Fannie Mae: 0.29%; 
60 days or more delinquent: Freddie Mac: 0.03%; 
90 days or more delinquent[A]: FDIC-insured institutions: 1.77%. 

Year end: 2009; 
60 days or more delinquent: Fannie Mae: 0.62%; 
60 days or more delinquent: Freddie Mac: 0.20%; 
90 days or more delinquent[A]: FDIC-insured institutions: 4.43%. 

Year end: 2010; 
60 days or more delinquent: Fannie Mae: 0.70%; 
60 days or more delinquent: Freddie Mac: 0.26%; 
90 days or more delinquent[A]: FDIC-insured institutions: 3.78%. 

Year end: 2011; 
60 days or more delinquent: Fannie Mae: 0.58%; 
60 days or more delinquent: Freddie Mac: 0.22%; 
90 days or more delinquent[A]: FDIC-insured institutions: 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. 

[End of table] 

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.[Footnote 67] 

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: 2005; 
60 days or more delinquent: 
Fannie Mae: 0.32%; 
Freddie Mac: 0.00%; 
Life insurance companies: 0.02%. 

Year end: 2006; 
60 days or more delinquent: 
Fannie Mae: 0.08%; 
Freddie Mac: 0.06%; 
Life insurance companies: 0.02%. 

Year end: 2007; 
60 days or more delinquent: 
Fannie Mae: 0.08%; 
Freddie Mac: 0.02%; 
Life insurance companies: 0.00%. 

Year end: 2008; 
60 days or more delinquent: 
Fannie Mae: 0.29%; 
Freddie Mac: 0.03%; 
Life insurance companies: 0.02%. 

Year end: 2009; 
60 days or more delinquent: 
Fannie Mae: 0.62%; 
Freddie Mac: 0.20%; 
Life insurance companies: 0.21%. 

Year end: 2010; 
60 days or more delinquent: 
Fannie Mae: 0.70%; 
Freddie Mac: 0.26%; 
Life insurance companies: 0.01%. 

Year end: 2011; 
60 days or more delinquent: 
Fannie Mae: 0.58%; 
Freddie Mac: 0.22%; 
Life insurance companies: 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. 

[End of table] 

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. 

Enterprises' Participation in Multifamily Risk-Sharing Programs Has 
Been Limited: 

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 
risk-sharing 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).[Footnote 68] The loans generally are not to exceed 
$50 million and the term of the mortgage is for 15 years 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.[Footnote 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.[Footnote 
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.[Footnote 71] From 2005 through 
2011, Freddie Mac collaborated with FHA on 59 loans or credit-enhanced 
bonds with unpaid principal balances of $298 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: 1995; 
Fannie Mae: Unpaid principal balance: $8 million; 
Fannie Mae: Number of loans: 1; 
Freddie Mac: Unpaid principal balance: not available; 
Freddie Mac: Number of loans: not available. 

Acquisition year: 1996; 
Fannie Mae: Unpaid principal balance: $8 million; 
Fannie Mae: Number of loans: 2; 
Freddie Mac: Unpaid principal balance: not available; 
Freddie Mac: Number of loans: not available. 

Acquisition year: 1997; 
Fannie Mae: Unpaid principal balance: $12 million; 
Fannie Mae: Number of loans: 4; 
Freddie Mac: Unpaid principal balance: not available; 
Freddie Mac: Number of loans: not available. 

Acquisition year: 1998; 
Fannie Mae: Unpaid principal balance: $28 million; 
Fannie Mae: Number of loans: 7; 
Freddie Mac: Unpaid principal balance: not available; 
Freddie Mac: Number of loans: not available. 

Acquisition year: 1999; 
Fannie Mae: Unpaid principal balance: $33 million; 
Fannie Mae: Number of loans: 7; 
Freddie Mac: Unpaid principal balance: not available; 
Freddie Mac: Number of loans: not available. 

Acquisition year: 2000; 
Fannie Mae: Unpaid principal balance: $41 million; 
Fannie Mae: Number of loans: 8; 
Freddie Mac: Unpaid principal balance: not available; 
Freddie Mac: Number of loans: not available. 

Acquisition year: 2001; 
Fannie Mae: Unpaid principal balance: $43 million; 
Fannie Mae: Number of loans: 7; 
Freddie Mac: Unpaid principal balance: not available; 
Freddie Mac: Number of loans: not available. 

Acquisition year: 2002; 
Fannie Mae: Unpaid principal balance: $111 million; 
Fannie Mae: Number of loans: 24; 
Freddie Mac: Unpaid principal balance: not available; 
Freddie Mac: Number of loans: not available. 

Acquisition year: 2003; 
Fannie Mae: Unpaid principal balance: $82 million; 
Fannie Mae: Number of loans: 20; 
Freddie Mac: Unpaid principal balance: not available; 
Freddie Mac: Number of loans: not available. 

Acquisition year: 2004; 
Fannie Mae: Unpaid principal balance: $80 million; 
Fannie Mae: Number of loans: 24; 
Freddie Mac: Unpaid principal balance: not available; 
Freddie Mac: Number of loans: not available. 

Acquisition year: 2005; 
Fannie Mae: Unpaid principal balance: $63 million; 
Fannie Mae: Number of loans: 21; 
Freddie Mac: Unpaid principal balance: $42 million; 
Freddie Mac: Number of loans: 8. 

Acquisition year: 2006; 
Fannie Mae: Unpaid principal balance: $45 million; 
Fannie Mae: Number of loans: 12; 
Freddie Mac: Unpaid principal balance: $77 million; 
Freddie Mac: Number of loans: 15. 

Acquisition year: 2007; 
Fannie Mae: Unpaid principal balance: $12 million; 
Fannie Mae: Number of loans: 3; 
Freddie Mac: Unpaid principal balance: $3 million; 
Freddie Mac: Number of loans: 1. 

Acquisition year: 2008; 
Fannie Mae: Unpaid principal balance: $16 million; 
Fannie Mae: Number of loans: 5; 
Freddie Mac: Unpaid principal balance: $2 million; 
Freddie Mac: Number of loans: 1. 

Acquisition year: 2009; 
Fannie Mae: Unpaid principal balance: $5 million; 
Fannie Mae: Number of loans: 2; 
Freddie Mac: Unpaid principal balance: $67 million; 
Freddie Mac: Number of loans: 15. 

Acquisition year: 2010; 
Fannie Mae: Unpaid principal balance: $8 million; 
Fannie Mae: Number of loans: 2; 
Freddie Mac: Unpaid principal balance: $24 million; 
Freddie Mac: Number of loans: 7. 

Acquisition year: 2011; 
Fannie Mae: Unpaid principal balance: $157 million; 
Fannie Mae: Number of loans: 8; 
Freddie Mac: Unpaid principal balance: $83 million; 
Freddie Mac: Number of loans: 12. 

Acquisition year: Total; 
Fannie Mae: Unpaid principal balance: $752 million; 
Fannie Mae: Number of loans: 157; 
Freddie Mac: Unpaid principal balance: $298 million; 
Freddie Mac: Number of loans: 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. 

[End of table] 

The enterprises also have entered into risk-sharing agreements with 
RHS, but to a lesser extent than with FHA. Under the enterprises' risk-
sharing 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 
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. 

Regulators Have Identified a Number of Deficiencies in Multifamily 
Credit Risk Management: 

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 
operational risk.[Footnote 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.[Footnote 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.[Footnote 74] FHFA is 
to follow up on deficiencies to ensure that the enterprise's response 
is appropriate, timely, and effective. 

Fannie Mae's Multifamily Credit Risk Challenges: 

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.[Footnote 75] 
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 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 risk-
management practices for multifamily loans. To address this issue, 
Fannie Mae stated that it planned to review its existing risk-
management 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. 
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. 

Freddie Mac's Multifamily Credit Risk Challenges: 

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.[Footnote 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. 

Agency Comments and Our Evaluation: 

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. 

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 [hyperlink, 
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, 

Signed by: 

William B. Shear: 
Director, Financial Markets and Community Investment: 

[End of section] 

Appendix I: Objectives, Scope, and Methodology: 

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.[Footnote 77] 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.[Footnote 78] 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. 
[Footnote 79] For Fannie Mae, securitized loans included MBS and 
discount MBS. Freddie Mac's securitized portfolio included 
participation certificates, tax-exempt bond securitization, and K-
deals.[Footnote 80] 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. 

In addition, we analyzed each enterprise's annual multifamily loan 
purchases from 1994 through 2011 as follows: 

* 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. 
[Footnote 81] For Fannie Mae, we limited our analysis to single loans 
associated with a single property.[Footnote 82] 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). 

* 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.[Footnote 83] 

* 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.[Footnote 84] 

* 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.[Footnote 85] 

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. 
[Footnote 86] 

We also analyzed data on the performance of multifamily loans each 
enterprise purchased from 1994 to 2011 as follows: 

* 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. 
[Footnote 87] 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. 

* Loan maturity--We determined the number and unpaid principal balance 
of loans that were going to mature within the next 10 years. 

* 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.[Footnote 88] 

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;[Footnote 89] 

* guarantee fees collected from 2002 through 2011; and: 

* administrative costs from 2002 through 2011 for Fannie Mae and from 
2005 through 2011 for Freddie Mac.[Footnote 90] 

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.[Footnote 91] 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.[Footnote 92] 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 
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.[Footnote 93] 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. 

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.[Footnote 
94] Although we found that these 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.[Footnote 95] We relied on HUD documents to 
assess the enterprises' annual goal performance from 1993 through 
2000.[Footnote 96] For 2001 through 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.[Footnote 97] 
Specifically, we 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.[Footnote 98] 

* For loan consortiums, NAAHL helped us obtain data from three 
consortiums.[Footnote 99] 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. 
[Footnote 100] Additionally, two of the three loan consortiums 
provided us with data on median loan size and the median number of 
units per property. 

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. 

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. 

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. 

[End of section] 

Appendix II: Fannie Mae and Freddie Mac's Multifamily Loan Purchases 
in the 25 Largest Metropolitan Areas: 

This appendix provides the data that support the interactive maps in 
this report (figures 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.[A] 

[A] 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. 

Table 12: Fannie Mae's Multifamily Loan Purchases in the 25 Largest 
Metropolitan Areas, 1994-2011: 

MSA: New York-Northern New Jersey-Long Island, NY-NJ-PA; 
1994: $744,141,000,000; 
1995: $316,137,000; 
1996: $1,045,773,000; 
1997: $966,751,000; 
1998: $1,379,102,000; 
1999: $1,247,888,000; 
2000: $779,314,000; 
2001: $2,377,162,000; 
2002: $3,192,993,000; 
2003: $5,733,621,000; 
2004: $4,303,917,000; 
2005: $3,877,184,000; 
2006: $4,023,909,000; 
2007: $5,456,795,000; 
2008: $3,331,178,000; 
2009: $1,642,534,000; 
2010: $1,602,823,000; 
2011: $2,107,160,000. 

MSA: Los Angeles-Long Beach-Santa Ana, CA; 
1994: $193,155,000; 
1995: $1,090,211,000; 
1996: $443,937,000; 
1997: $427,237,000; 
1998: $2,728,972,000; 
1999: $882,790,000; 
2000: $591,222,000; 
2001: $2,190,293,000; 
2002: $3,227,513,000; 
2003: $7,474,893,000; 
2004: $2,253,669,000; 
2005: $3,812,396,000; 
2006: $2,947,757,000; 
2007: $5,006,683,000; 
2008: $4,693,595,000; 
2009: $2,246,120,000; 
2010: $2,503,525,000; 
2011: $1,688,719,000. 

MSA: Chicago-Joliet-Naperville, IL-IN-WI; 
1994: $159,606,000; 
1995: $304,689,000; 
1996: $261,066,000; 
1997: $202,107,000; 
1998: $335,301,000; 
1999: $280,243,000; 
2000: $248,369,000; 
2001: $536,809,000; 
2002: $258,059,000; 
2003: $553,946,000; 
2004: $312,787,000; 
2005: $410,657,000; 
2006: $405,133,000; 
2007: $661,342,000; 
2008: $908,570,000; 
2009: $445,993,000; 
2010: $362,785,000; 
2011: $611,549,000. 

MSA: Dallas-Fort Worth-Arlington, TX; 
1994: $260,535,000; 
1995: $283,680,000; 
1996: $648,148,000; 
1997: $554,908,000; 
1998: $559,759,000; 
1999: $513,918,000; 
2000: $519,902,000; 
2001: $797,390,000; 
2002: $392,798,000; 
2003: $276,426,000; 
2004: $349,067,000; 
2005: $450,081,000; 
2006: $444,041,000; 
2007: $678,853,000; 
2008: $1,068,544,000; 
2009: $423,324,000; 
2010: $534,187,000; 
2011: $1,098,665,000. 

MSA: Philadelphia-Camden-Wilmington, PA-NJ-DE-MD; 
1994: $90,359,000; 
1995: $99,101,000; 
1996: $237,716,000; 
1997: $90,612,000; 
1998: $456,009,000; 
1999: $95,860,000; 
2000: $153,163,000; 
2001: $383,988,000; 
2002: $337,505,000; 
2003: $655,283,000; 
2004: $386,825,000; 
2005: $677,978,000; 
2006: $531,173,000; 
2007: $654,429,000; 
2008: $738,626,000; 
2009: $434,437,000; 
2010: $438,469,000; 
2011: $367,251,000. 

MSA: Houston-Sugar Land-Baytown, TX; 
1994: $189,002,000; 
1995: $157,105,000; 
1996: $191,885,000; 
1997: $221,139,000; 
1998: $211,003,000; 
1999: $292,489,000; 
2000: $207,980,000; 
2001: $678,698,000; 
2002: $474,419,000; 
2003: $656,017,000; 
2004: $310,041,000; 
2005: $320,471,000; 
2006: $347,096,000; 
2007: $635,106,000; 
2008: $695,509,000; 
2009: $386,099,000; 
2010: $188,618,000; 
2011: $447,744,000. 

MSA: Washington-Arlington-Alexandria, DC-VA-MD-WV; 
1994: $487,909,000; 
1995: $111,477,000; 
1996: $260,086,000; 
1997: $815,911,000; 
1998: $434,551,000; 
1999: $369,827,000; 
2000: $681,352,000; 
2001: $1,062,119,000; 
2002: $688,892,000; 
2003: $675,196,000; 
2004: $759,981,000; 
2005: $854,436,000; 
2006: $666,393,000; 
2007: $604,191,000; 
2008: $978,292,000; 
2009: $837,503,000; 
2010: $1,224,012,000; 
2011: $1,368,551,000. 

MSA: Miami-Fort Lauderdale-Pompano Beach, FL; 
1994: $161,563,000; 
1995: $187,811,000; 
1996: $103,843,000; 
1997: $88,851,000; 
1998: $165,871,000; 
1999: $253,629,000; 
2000: $258,201,000; 
2001: $539,022,000; 
2002: $378,649,000; 
2003: $473,447,000; 
2004: $248,655,000; 
2005: $125,296,000; 
2006: $254,791,000; 
2007: $305,189,000; 
2008: $360,493,000; 
2009: $291,370,000; 
2010: $349,543,000; 
2011: $488,996,000. 

MSA: Atlanta-Sandy Springs-Marietta, GA; 
1994: $207,721,000; 
1995: $505,419,000; 
1996: $277,673,000; 
1997: $198,247,000; 
1998: $248,780,000; 
1999: $374,844,000; 
2000: $542,991,000; 
2001: $503,549,000; 
2002: $297,358,000; 
2003: $333,497,000; 
2004: $224,567,000; 
2005: $318,887,000; 
2006: $307,769,000; 
2007: $269,413,000; 
2008: $495,317,000; 
2009: $180,582,000; 
2010: $192,989,000; 
2011: $331,364,000. 

MSA: Boston-Cambridge-Quincy, MA-NH; 
1994: $25,067,000; 
1995: $121,465,000; 
1996: $284,170,000; 
1997: $83,351,000; 
1998: $187,234,000; 
1999: $202,243,000; 
2000: $111,179,000; 
2001: $215,387,000; 
2002: $257,189,000; 
2003: $552,591,000; 
2004: $207,520,000; 
2005: $227,707,000; 
2006: $355,990,000; 
2007: $296,435,000; 
2008: $493,423,000; 
2009: $223,776,000; 
2010: $162,777,000; 
2011: $323,548,000. 

MSA: San Francisco-Oakland-Fremont, CA; 
1994: $183,764,000; 
1995: $383,417,000; 
1996: $204,306,000; 
1997: $79,335,000; 
1998: $758,383,000; 
1999: $337,698,000; 
2000: $290,418,000; 
2001: $1,197,640,000; 
2002: $1,385,614,000; 
2003: $3,025,069,000; 
2004: $929,912,000; 
2005: $1,010,337,000; 
2006: $703,834,000; 
2007: $1,902,171,000; 
2008: $668,051,000; 
2009: $542,974,000; 
2010: $670,690,000; 
2011: $745,012,000. 

MSA: Detroit-Warren-Livonia, MI; 
1994: $110,677,000; 
1995: $78,557,000; 
1996: $187,459,000; 
1997: $81,634,000; 
1998: $118,438,000; 
1999: $187,072,000; 
2000: $253,395,000; 
2001: $334,847,000; 
2002: $216,139,000; 
2003: $313,633,000; 
2004: $180,732,000; 
2005: $183,639,000; 
2006: $261,046,000; 
2007: $205,137,000; 
2008: $306,178,000; 
2009: $39,272,000; 
2010: $18,176,000; 
2011: $122,245,000. 

MSA: Riverside-San Bernardino-Ontario, CA; 
1994: $57,507,000; 
1995: $56,322,000; 
1996: $77,402,000; 
1997: $65,831,000; 
1998: $101,698,000; 
1999: $144,180,000; 
2000: $140,042,000; 
2001: $512,921,000; 
2002: $479,780,000; 
2003: $599,849,000; 
2004: $408,861,000; 
2005: $507,096,000; 
2006: $215,590,000; 
2007: $519,422,000; 
2008: $453,819,000; 
2009: $383,742,000; 
2010: $209,733,000; 
2011: $429,682,000. 

MSA: Phoenix-Mesa-Glendale, AZ; 
1994: $210,975,000; 
1995: $132,133,000; 
1996: $209,013,000; 
1997: $187,861,000; 
1998: $329,813,000; 
1999: $180,843,000; 
2000: $243,343,000; 
2001: $291,264,000; 
2002: $185,562,000; 
2003: $237,146,000; 
2004: $239,265,000; 
2005: $304,002,000; 
2006: $262,805,000; 
2007: $276,380,000; 
2008: $340,706,000; 
2009: $236,112,000; 
2010: $265,024,000; 
2011: $334,577,000. 

MSA: Seattle-Tacoma, Bellevue, WA; 
1994: $130,902,000; 
1995: $47,826,000; 
1996: $284,131,000; 
1997: $337,617,000; 
1998: $477,519,000; 
1999: $461,248,000; 
2000: $264,806,000; 
2001: $710,523,000; 
2002: $445,676,000; 
2003: $963,368,000; 
2004: $473,119,000; 
2005: $795,925,000; 
2006: $775,228,000; 
2007: $1,087,787,000; 
2008: $$690,980,000; 
2009: $503,675,000; 
2010: $507,754,000; 
2011: $755,478,000. 

MSA: Minneapolis-St. Paul-Bloomington, MN-WI; 
1994: $46,588,000; 
1995: $78,893,000; 
1996: $93,671,000; 
1997: $69,360,000; 
1998: $144,920,000; 
1999: $93,722,000; 
2000: $161,660,000; 
2001: $293,075,000; 
2002: $338,210,000; 
2003: $391,891,000; 
2004: $207,332,000; 
2005: $339,476,000; 
2006: $222,441,000; 
2007: $344,418,000; 
2008: $232,052,000; 
2009: $261,294,000; 
2010: $151,538,000; 
2011: $267,636,000. 

MSA: San Diego-Carlsbad-San Marcos, CA; 
1994: $115,646,000; 
1995: $,867,000; 
1996: $96,833,000; 
1997: $89,659,000; 
1998: $545,440,000; 
1999: $199,398,000; 
2000: $338,029,000; 
2001: $619,180,000; 
2002: $576,425,000; 
2003: $1,875,615,000; 
2004: $354,079,000; 
2005: $698,159,000; 
2006: $387,975,000; 
2007: $914,426,000; 
2008: $780,067,000; 
2009: $464,152,000; 
2010: $364,279,000; 
2011: $547,635,000. 

MSA: St. Louis, MO-IL; 
1994: $30,975,000; 
1995: $61,940,000; 
1996: $60,222,000; 
1997: $100,904,000; 
1998: $123,889,000; 
1999: $74,390,000; 
2000: $22,742,000; 
2001: $50,442,000; 
2002: $178,155,000; 
2003: $168,635,000; 
2004: $65,811,000; 
2005: $129,096,000; 
2006: $172,531,000; 
2007: $214,876,000; 
2008: $184,667,000; 
2009: $44,648,000; 
2010: $118,723,000; 
2011: $138,239,000. 

MSA: Tampa-St. Petersburg-Clearwater, FL; 
1994: $43,636,000; 
1995: $67,424,000; 
1996: $54,090,000; 
1997: $19,133,000; 
1998: $54,360,000; 
1999: $132,055,000; 
2000: $153,703,000; 
2001: $175,091,000; 
2002: $197,644,000; 
2003: $182,369,000; 
2004: $223,621,000; 
2005: $358,157,000; 
2006: $177,865,000; 
2007: $281,639,000; 
2008: $185,247,000; 
2009: $115,731,000; 
2010: $106,910,000; 
2011: $218,834,000. 

MSA: Baltimore-Towson, MD; 
1994: $52,195,000; 
1995: $86,834,000; 
1996: $292,355,000; 
1997: $215,217,000; 
1998: $225,269,000; 
1999: $85,167,000; 
2000: $201,038,000; 
2001: $246,974,000; 
2002: $385,717,000; 
2003: $749,660,000; 
2004: $463,337,000; 
2005: $323,491,000; 
2006: $407,868,000; 
2007: $483,970,000; 
2008: $206,235,000; 
2009: $233,707,000; 
2010: $193,216,000; 
2011: $352,232,000. 

MSA: Denver-Aurora-Broomfield, CO; 
1994: $144,852,000; 
1995: $130,556,000; 
1996: $108,356,000; 
1997: $108,655,000; 
1998: $293,959,000; 
1999: $200,359,000; 
2000: $375,825,000; 
2001: $301,975,000; 
2002: $378,944,000; 
2003: $362,331,000; 
2004: $94,183,000; 
2005: $195,868,000; 
2006: $116,886,000; 
2007: $296,874,000; 
2008: $326,176,000; 
2009: $361,348,000; 
2010: $408,563,000; 
2011: $504,864,000. 

MSA: Pittsburgh, PA; 
1994: $11,258,000; 
1995: $7,749,000; 
1996: $11,528,000; 
1997: $22,065,000; 
1998: $56,284,000; 
1999: $21,741,000; 
2000: $21,628,000; 
2001: $30,573,000; 
2002: $28,328,000; 
2003: $12,452,000; 
2004: $19,103,000; 
2005: $62,112,000; 
2006: $37,662,000; 
2007: $43,533,000; 
2008: $88,682,000; 
2009: $37,857,000; 
2010: $102,438,000; 
2011: $44,072,000. 

MSA: Portland-Vancouver-Hillsboro, ORWA
1994: $130,061,000; 
1995: $21,876,000; 
1996: $64,558,000; 
1997: $88,133,000; 
1998: $181,140,000; 
1999: $142,531,000; 
2000: $92,721,000; 
2001: $317,825,000; 
2002: $147,658,000; 
2003: $577,599,000; 
2004: $192,460,000; 
2005: $209,527,000; 
2006: $74,645,000; 
2007: $276,476,000; 
2008: $284,889,000; 
2009: $187,602,000; 
2010: $299,319,000; 
2011: $363,801,000. 

MSA: Sacramento-Arden-Arcade-Roseville, CA; 
1994: $58,535,000; 
1995: $114,800,000; 
1996: $62,391,000; 
1997: $99,771,000; 
1998: $208,988,000; 
1999: $207,552,000; 
2000: $242,558,000; 
2001: $590,909,000; 
2002: $624,506,000; 
2003: $1,100,782,000; 
2004: $189,908,000; 
2005: $342,004,000; 
2006: $309,785,000; 
2007: $446,056,000; 
2008: $282,184,000; 
2009: $256,999,000; 
2010: $234,986,000; 
2011: $414,916,000. 

MSA: San Antonio-New Braunfels, TX; 
1994: $114,363,000; 
1995: $33,425,000; 
1996: $69,728,000; 
1997: $62,327,000; 
1998: $158,068,000; 
1999: $53,103,000; 
2000: $84,178,000; 
2001: $146,315,000; 
2002: $124,249,000; 
2003: $103,795,000; 
2004: $146,853,000; 
2005: $213,202,000; 
2006: $101,279,000; 
2007: $188,455,000; 
2008: $184,899,000; 
2009: $137,262,000; 
2010: $90,626,000; 
2011: $334,612,000. 

MSA: Total; 
1994: $3,960,990,000; 
1995: $4,763,715,000; 
1996: $5,630,336,000; 
1997: $5,276,615,000; 
1998: $10,484,750,000; 
1999: $7,034,787,000; 
2000: $6,979,756,000; 
2001: $15,103,971,000; 
2002: $15,197,980,000; 
2003: $28,049,113,000; 
2004: $13,545,606,000; 
2005: $16,747,181,000; 
2006: $14,511,489,000; 
2007: $22,050,054,000; 
2008: $18,978,378,000; 
2009: $10,918,113,000; 
2010: $11,301,703,000; 
2011: $14,407,381,000. 

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. 

[End of table] 

Table 13 shows Freddie Mac’s multifamily loan purchases in the 25 
largest MSAs from 1994 through 2011. 

Table 13: Freddie Mac's Multifamily Loan Purchases in the 25 Largest 
Metropolitan Areas, 1994-2011: 

MSA: New York-Northern New Jersey-Long Island, NY-NJ-PA; 
1994: $98,688,000; 
1995: $236,343,000; 
1996: $400,449,000; 
1997: $308,555,000; 
1998: $595,265,000; 
1999: $954,772,000; 
2000: $1,144,572,000; 
2001: $1,236,949,000; 
2002: $916,149,000; 
2003: $1,634,769,000; 
2004: $1,179,272,000; 
2005: $1,148,238,000; 
2006: $1,457,941,000; 
2007: $1,539,477,000; 
2008: $1,940,288,000; 
2009: $2,464,723,000; 
2010: $1,589,207,000; 
2011: $1,440,366,000. 

MSA: Los Angeles-Long Beach-Santa Ana, CA; 
1994: $92,853,000; 
1995: $9,192,000; 
1996: $45,635,000; 
1997: $55,712,000; 
1998: $336,592,000; 
1999: $808,919,000; 
2000: $570,388,000; 
2001: $1,069,601,000; 
2002: $1,738,336,000; 
2003: $4,560,043,000; 
2004: $1,639,905,000; 
2005: $489,965,000; 
2006: $1,013,025,000; 
2007: $1,452,313,000; 
2008: $1,581,290,000; 
2009: $2,080,086,000; 
2010: $878,087,000; 
2011: $1,323,208,000. 

MSA: Chicago-Joliet-Naperville, IL-IN-WI; 
1994: $6,609,000; 
1995: $55,753,000; 
1996: $113,224,000; 
1997: $43,343,000; 
1998: $121,094,000; 
1999: $424,976,000; 
2000: $307,711,000; 
2001: $206,089,000; 
2002: $523,214,000; 
2003: $1,110,551,000; 
2004: $379,521,000; 
2005: $293,569,000; 
2006: $396,899,000; 
2007: $617,956,000; 
2008: $788,486,000; 
2009: $357,806,000; 
2010: $504,584,000; 
2011: $393,335,000. 

MSA: Dallas-Fort Worth-Arlington, TX; 
1994: $63,800,000; 
1995: $49,735,000; 
1996: $112,891,000; 
1997: $54,673,000; 
1998: $8,659,000; 
1999: $381,015,000; 
2000: $141,791,000; 
2001: $542,542,000; 
2002: $658,402,000; 
2003: $380,499,000; 
2004: $761,447,000; 
2005: $876,955,000; 
2006: $696,385,000; 
2007: $1,301,356,000; 
2008: $1,431,090,000; 
2009: $809,458,000; 
2010: $566,460,000; 
2011: $946,068,000. 

MSA: Philadelphia-Camden-Wilmington, PA-NJ-DE-MD; 
1994: $38,257,000; 
1995: $83,317,000; 
1996: $237,688,000; 
1997: $118,309,000; 
1998: $164,235,000; 
1999: $128,289,000; 
2000: $125,509,000; 
2001: $120,192,000; 
2002: $213,443,000; 
2003: $196,386,000; 
2004: $462,110,000; 
2005: $331,806,000; 
2006: $326,157,000; 
2007: $370,700,000; 
2008: $581,694,000; 
2009: $225,782,000; 
2010: $368,133,000; 
2011: $261,067,000. 

MSA: Houston-Sugar Land-Baytown, TX; 
1994: $32,742,000; 
1995: $18,585,000; 
1996: $37,707,000; 
1997: $169,185,000; 
1998: $74,981,000; 
1999: $219,197,000; 
2000: $172,053,000; 
2001: $249,732,000; 
2002: $482,589,000; 
2003: $313,643,000; 
2004: $183,060,000; 
2005: $306,875,000; 
2006: $280,425,000; 
2007: $777,784,000; 
2008: $918,692,000; 
2009: $731,871,000; 
2010: $581,965,000; 
2011: $878,911,000. 

MSA: Washington-Arlington-Alexandria, DC-VA-MD-WV; 
1994: $86,414,000; 
1995: $61,926,000; 
1996: $69,220,000; 
1997: $189,667,000; 
1998: $200,386,000; 
1999: $700,749,000; 
2000: $555,173,000; 
2001: $513,366,000; 
2002: $662,132,000; 
2003: $547,724,000; 
2004: $702,160,000; 
2005: $430,358,000; 
2006: $1,306,965,000; 
2007: $1,713,566,000; 
2008: $1,786,065,000; 
2009: $1,464,062,000; 
2010: $1,481,161,000; 
2011: $1,885,826,000. 

MSA: Miami-Fort Lauderdale-Pompano Beach, FL; 
1994: $37,303,000; 
1995: $75,615,000; 
1996: $84,048,000; 
1997: $68,594,000; 
1998: $273,059,000; 
1999: $339,779,000; 
2000: $141,099,000; 
2001: $208,012,000; 
2002: $215,487,000; 
2003: $286,767,000; 
2004: $109,039,000; 
2005: $234,294,000; 
2006: $216,749,000; 
2007: $408,907,000; 
2008: $474,604,000; 
2009: $402,362,000; 
2010: $381,621,000; 
2011: $248,882,000. 

MSA: Atlanta-Sandy Springs-Marietta, GA; 
1994: $13,283,000; 
1995: $114,478,000; 
1996: $65,812,000; 
1997: $140,079,000; 
1998: $159,881,000; 
1999: $377,732,000; 
2000: $451,907,000; 
2001: $631,652,000; 
2002: $461,872,000; 
2003: $473,488,000; 
2004: $587,299,000; 
2005: $730,248,000; 
2006: $675,899,000; 
2007: $1,140,981,000; 
2008: $1,432,816,000; 
2009: $679,148,000; 
2010: $560,696,000; 
2011: $769,227,000. 

MSA: Boston-Cambridge-Quincy, MA-NH;
1994: $20,051,000; 
1995: $16,352,000; 
1996: $45,657,000; 
1997: $4,055,000; 
1998: $110,820,000; 
1999: $108,227,000; 
2000: $104,446,000; 
2001: $272,540,000; 
2002: $254,871,000; 
2003: $116,971,000; 
2004: $238,104,000; 
2005: $139,834,000; 
2006: $139,101,000; 
2007: $543,756,000; 
2008: $402,123,000; 
2009: $455,982,000; 
2010: $180,823,000; 
2011: $237,770,000. 

MSA: San Francisco-Oakland-Fremont, CA; 
1994: $0; 
1995: $9,713,000; 
1996: $3,451,000; 
1997: $225,249,000; 
1998: $40,157,000; 
1999: $461,416,000; 
2000: $50,408,000; 
2001: $420,231,000; 
2002: $1,064,658,000; 
2003: $1,637,145,000; 
2004: $625,352,000; 
2005: $357,881,000; 
2006: $124,221,000; 
2007: $767,933,000; 
2008: $776,039,000; 
2009: $427,612,000; 
2010: $396,735,000; 
2011: $309,341,000. 

MSA: Detroit-Warren-Livonia, MI; 
1994: $11,756,000; 
1995: $21,515,000; 
1996: $79,618,000; 
1997: $34,719,000; 
1998: $53,895,000; 
1999: $68,582,000; 
2000: $82,242,000; 
2001: $73,900,000; 
2002: $55,217,000; 
2003: $84,801,000; 
2004: $46,662,000; 
2005: $150,160,000; 
2006: $105,028,000; 
2007: $62,979,000; 
2008: $130,205,000; 
2009: $12,350,000; 
2010: $14,850,000; 
2011: $116,037,000. 

MSA: Riverside-San Bernardino-Ontario, CA; 
1994: $0; 
1995: $10,284,000; 
1996: $8,970,000; 
1997: $18,099,000; 
1998: $16,785,000; 
1999: $71,381,000; 
2000: $117,135,000; 
2001: $227,688,000; 
2002: $183,831,000; 
2003: $216,068,000; 
2004: $462,983,000; 
2005: $236,340,000; 
2006: $140,611,000; 
2007: $348,845,000; 
2008: $374,126,000; 
2009: $173,119,000; 
2010: $305,109,000; 
2011: $368,436,000. 

MSA: Phoenix-Mesa-Glendale, AZ; 
1994: $3,713,000; 
1995: $29,776,000; 
1996: $37,681,000; 
1997: $20,145,000; 
1998: $58,423,000; 
1999: $198,004,000; 
2000: $205,551,000; 
2001: $210,905,000; 
2002: $255,305,000; 
2003: $81,503,000; 
2004: $264,117,000; 
2005: $270,732,000; 
2006: $190,400,000; 
2007: $293,416,000; 
2008: $478,233,000; 
2009: $526,070,000; 
2010: $401,121,000; 
2011: $515,286,000. 

MSA: Seattle-Tacoma, Bellevue, WA; 
1994: $6,895,000; 
1995: $42,784,000; 
1996: $23,012,000; 
1997: $78,277,000; 
1998: $116,133,000; 
1999: $129,580,000; 
2000: $129,410,000; 
2001: $300,944,000; 
2002: $168,384,000; 
2003: $222,966,000; 
2004: $303,461,000; 
2005: $351,033,000; 
2006: $176,285,000; 
2007: $824,566,000; 
2008: $696,973,000; 
2009: $529,817,000; 
2010: $300,879,000; 
2011: $687,120,000. 

MSA: Minneapolis-St. Paul-Bloomington, MN-WI; 
1994: $20,424,000; 
1995: $40,764,000; 
1996: $43,306,000; 
1997: $32,595,000; 
1998: $165,266,000; 
1999: $281,567,000; 
2000: $62,932,000; 
2001: $135,550,000; 
2002: $228,673,000; 
2003: $163,454,000; 
2004: $268,450,000; 
2005: $259,826,000; 
2006: $107,813,000; 
2007: $253,714,000; 
2008: $385,799,000; 
2009: $155,550,000; 
2010: $134,649,000; 
2011: $77,345,000. 

MSA: San Diego-Carlsbad-San Marcos, CA; 
1994: $41,136,000; 
1995: $33,147,000; 
1996: $29,559,000; 
1997: $92,727,000; 
1998: $144,321,000; 
1999: $208,700,000; 
2000: $125,447,000; 
2001: $514,197,000; 
2002: $630,942,000; 
2003: $961,244,000; 
2004: $587,888,000; 
2005: $170,079,000; 
2006: $165,347,000; 
2007: $475,320,000; 
2008: $606,983,000; 
2009: $316,492,000; 
2010: $311,837,000; 
2011: $321,595,000. 

MSA: St. Louis, MO-IL; 
1994: $0; 
1995: $0; 
1996: $23,466,000; 
1997: $2,781,000; 
1998: $6,036,000; 
1999: $7,222,000; 
2000: $19,077,000; 
2001: $84,467,000; 
2002: $71,250,000; 
2003: $63,706,000; 
2004: $26,963,000; 
2005: $98,264,000; 
2006: $126,030,000; 
2007: $288,571,000; 
2008: $72,309,000; 
2009: $104,701,000; 
2010: $42,068,000; 
2011: $87,124,000. 

MSA: Tampa-St. Petersburg-Clearwater, FL; 
1994: $3,517,000; 
1995: $5,505,000; 
1996: $30,306,000; 
1997: $24,768,000; 
1998: $125,093,000; 
1999: $132,318,000; 
2000: $90,305,000; 
2001: $113,869,000; 
2002: $107,194,000; 
2003: $71,493,000; 
2004: $96,610,000; 
2005: $216,877,000; 
2006: $110,984,000; 
2007: $131,451,000; 
2008: $228,801,000; 
2009: $250,012,000; 
2010: $267,510,000; 
2011: $407,552,000. 

MSA: Baltimore-Towson, MD; 
1994: $48,712,000; 
1995: $10,243,000; 
1996: $68,499,000; 
1997: $33,501,000; 
1998: $141,717,000; 
1999: $286,844,000; 
2000: $279,298,000; 
2001: $186,492,000; 
2002: $187,662,000; 
2003: $355,031,000; 
2004: $458,447,000; 
2005: $444,548,000; 
2006: $616,001,000; 
2007: $708,209,000; 
2008: $350,448,000; 
2009: $172,733,000; 
2010: $132,564,000; 
2011: $386,512,000. 

MSA: Denver-Aurora-Broomfield, CO; 
1994: $1,351,000; 
1995: $88,349,000; 
1996: $69,331,000; 
1997: $11,883,000; 
1998: $151,222,000; 
1999: $184,073,000; 
2000: $113,067,000; 
2001: $353,487,000; 
2002: $244,802,000; 
2003: $136,900,000; 
2004: $90,690,000; 
2005: $120,637,000; 
2006: $261,103,000; 
2007: $461,569,000; 
2008: $522,927,000; 
2009: $553,949,000; 
2010: $346,467,000; 
2011: $578,150,000. 

MSA: Pittsburgh, PA; 
1994: $0; 
1995: $14,218,000; 
1996: $21,176,000; 
1997: $22,789,000; 
1998: $65,060,000; 
1999: $17,374,000; 
2000: $9,568,000; 
2001: $32,603,000; 
2002: $40,276,000; 
2003: $40,932,000; 
2004: $34,751,000; 
2005: $22,881,000; 
2006: $12,318,000; 
2007: $30,552,000; 
2008: $57,104,000; 
2009: $26,531,000; 
2010: $126,040,000; 
2011: $38,624,000. 

MSA: Portland-Vancouver-Hillsboro, OR-WA; 
1994: $581,000; 
1995: $22,716,000; 
1996: $54,429,000; 
1997: $62,793,000; 
1998: $35,803,000; 
1999: $60,689,000; 
2000: $21,274,000; 
2001: $36,559,000; 
2002: $58,778,000; 
2003: $132,516,000; 
2004: $50,846,000; 
2005: $167,700,000; 
2006: $60,128,000; 
2007: $275,651,000; 
2008: $221,758,000; 
2009: $197,850,000; 
2010: $42,448,000; 
2011: $182,175,000. 

MSA: Sacramento-Arden-Arcade-Roseville, CA; 
1994: $10,717,000; 
1995: $0; 
1996: $1,386,000; 
1997: $0; 
1998: $17,029,000; 
1999: $63,913,000; 
2000: $0; 
2001: $206,922,000; 
2002: $175,913,000; 
2003: $363,087,000; 
2004: $296,622,000; 
2005: $71,267,000; 
2006: $208,880,000; 
2007: $221,769,000; 
2008: $257,972,000; 
2009: $136,910,000; 
2010: $76,619,000; 
2011: $116,336,000. 

MSA: San Antonio-New Braunfels, TX; 
1994: $14,598,000; 
1995: $48,793,000; 
1996: $2,416,000; 
1997: $1,131,000; 
1998: $12,522,000; 
1999: $42,036,000; 
2000: $14,618,000; 
2001: $82,959,000; 
2002: $77,081,000; 
2003: $82,143,000; 
2004: $62,554,000; 
2005: $71,098,000; 
2006: $113,136,000; 
2007: $270,253,000; 
2008: $316,262,000; 
2009: $174,258,000; 
2010: $168,043,000; 
2011: $290,701,000. 

MSA: Total; 
1994: $653,399,000; 
1995: $1,099,101,000; 
1996: $1,708,935,000; 
1997: $1,813,629,000; 
1998: $3,194,434,000; 
1999: $6,657,354,000; 
2000: $5,034,980,000; 
2001: $8,031,447,000; 
2002: $9,676,461,000; 
2003: $14,233,830,000; 
2004: $9,918,313,000; 
2005: $7,991,464,000; 
2006: $9,027,830,000; 
2007: $15,281,594,000; 
2008: $16,813,086,000; 
2009: $13,429,231,000; 
2010: $10,159,674,000; 
2011: $12,866,994,000. 

Source: GAO analysis of Freddie Mac data. 

Note: All dollar figures are in 2012 dollars. 

[End of section] 

Appendix III: Additional Data on Fannie Mae and Freddie Mac's 
Multifamily Activities: 

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. 

Multifamily Loan Purchases by State: 

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: Alabama; 
Fannie Mae: $1.988 billion; 
Fannie Mae rank: 28; 
Freddie Mac: $1.910 billion; 
Freddie Mac rank: 23. 

State: Alaska; 
Fannie Mae: $240 million; 
Fannie Mae rank: 46; 
Freddie Mac: $0; 
Freddie Mac rank: 51. 

State: Arizona; 
Fannie Mae: $6.866 billion; 
Fannie Mae rank: 12; 
Freddie Mac: $4.672 billion; 
Freddie Mac rank: 14. 

State: Arkansas; 
Fannie Mae: $796 million; 
Fannie Mae rank: 38; 
Freddie Mac: $484 million; 
Freddie Mac rank: 37. 

State: California; 
Fannie Mae: $97.281 billion; 
Fannie Mae rank: 1; 
Freddie Mac: $47.630 billion; 
Freddie Mac rank: 1. 

State: Colorado; 
Fannie Mae: $6.445 billion; 
Fannie Mae rank: 13; 
Freddie Mac: $5.267 billion; 
Freddie Mac rank: 13. 

State: Connecticut; 
Fannie Mae: $1.790 billion; 
Fannie Mae rank: 29; 
Freddie Mac: $1.759 billion; 
Freddie Mac rank: 25. 

State: Delaware; 
Fannie Mae: $966 million; 
Fannie Mae rank: 36; 
Freddie Mac: $347 million; 
Freddie Mac rank: 41. 

State: District of Columbia; 
Fannie Mae: $2.100 billion; 
Fannie Mae rank: 27; 
Freddie Mac: $1.749 billion; 
Freddie Mac rank: 26. 

State: Florida; 
Fannie Mae: $15.397 billion; 
Fannie Mae rank: 4; 
Freddie Mac: $13.580 billion; 
Freddie Mac rank: 4. 

State: Georgia; 
Fannie Mae: $7.307 billion; 
Fannie Mae rank: 10; 
Freddie Mac: $10.105 billion; 
Freddie Mac rank: 6. 

State: Hawaii; 
Fannie Mae: $734 million; 
Fannie Mae rank: 40; 
Freddie Mac: $361 million; 
Freddie Mac rank: 39. 

State: Idaho; 
Fannie Mae: $412 million; 
Fannie Mae rank: 43; 
Freddie Mac: $111 million; 
Freddie Mac rank: 45. 

State: Illinois; 
Fannie Mae: $7.652 billion; 
Fannie Mae rank: 9; 
Freddie Mac: $6.775 billion; 
Freddie Mac rank: 8. 

State: Indiana; 
Fannie Mae: $2.644 billion; 
Fannie Mae rank: 24; 
Freddie Mac: $1.659 billion; 
Freddie Mac rank: 28. 

State: Iowa; 
Fannie Mae: $761 million; 
Fannie Mae rank: 39; 
Freddie Mac: $467 million; 
Freddie Mac rank: 38. 

State: Kansas; 
Fannie Mae: $1.486 billion; 
Fannie Mae rank: 32; 
Freddie Mac: $1.684 billion; 
Freddie Mac rank: 27. 

State: Kentucky; 
Fannie Mae: $1.044; billion 
Fannie Mae rank: 35; 
Freddie Mac: $833 million; 
Freddie Mac rank: 33. 

State: Louisiana; 
Fannie Mae: $2.932 billion; 
Fannie Mae rank: 22; 
Freddie Mac: $1.378 billion; 
Freddie Mac rank: 29. 

State: Maine; 
Fannie Mae: $230 million; 
Fannie Mae rank: 47; 
Freddie Mac: $97 million; 
Freddie Mac rank: 46. 

State: Maryland; 
Fannie Mae: $11.039 billion; 
Fannie Mae rank: 6; 
Freddie Mac: $9.966 billion; 
Freddie Mac rank: 7. 

State: Massachusetts; 
Fannie Mae: $4.933 billion; 
Fannie Mae rank: 17; 
Freddie Mac: $3.647 billion; 
Freddie Mac rank: 15. 

State: Michigan; 
Fannie Mae: $5.362 billion; 
Fannie Mae rank: 15; 
Freddie Mac: $2.370 billion 
Freddie Mac rank: 20. 

State: Minnesota; 
Fannie Mae: $4.035 billion; 
Fannie Mae rank: 20; 
Freddie Mac: $3.017 billion; 
Freddie Mac rank: 17. 

State: Mississippi; 
Fannie Mae: $722 million; 
Fannie Mae rank: 41; 
Freddie Mac: $706 million; 
Freddie Mac rank: 36. 

State: Missouri; 
Fannie Mae: $2.754 billion; 
Fannie Mae rank: 23; 
Freddie Mac: $2.079 billion; 
Freddie Mac rank: 21. 

State: Montana; 
Fannie Mae: $269 million; 
Fannie Mae rank: 45; 
Freddie Mac: $60 million; 
Freddie Mac rank: 48. 

State: Nebraska; 
Fannie Mae: $1.045 billion; 
Fannie Mae rank: 34; 
Freddie Mac: $1.076 billion; 
Freddie Mac rank: 30. 

State: Nevada; 
Fannie Mae: $5.943 billion; 
Fannie Mae rank: 14; 
Freddie Mac: $2.915 billion; 
Freddie Mac rank: 19. 

State: New Hampshire; 
Fannie Mae: $806 million; 
Fannie Mae rank: 37; 
Freddie Mac: $338 million; 
Freddie Mac rank: 42. 

State: New Jersey; 
Fannie Mae: $7.228 billion; 
Fannie Mae rank: 11; 
Freddie Mac: $5.886 billion; 
Freddie Mac rank: 10. 

State: New Mexico; 
Fannie Mae: $1.115 billion; 
Fannie Mae rank: 33; 
Freddie Mac: $723 million; 
Freddie Mac rank: 35. 

State: New York; 
Fannie Mae: $40.653 billion; 
Fannie Mae rank: 2; 
Freddie Mac: $17.923 billion; 
Freddie Mac rank: 3. 

State: North Carolina; 
Fannie Mae: $4.897 billion; 
Fannie Mae rank: 18; 
Freddie Mac: $5.713 billion; 
Freddie Mac rank: 11. 

State: North Dakota; 
Fannie Mae: $219 million; 
Fannie Mae rank: 48; 
Freddie Mac: $272 million; 
Freddie Mac rank: 43. 

State: Ohio; 
Fannie Mae: $5.302 billion; 
Fannie Mae rank: 16; 
Freddie Mac: $3.506 billion; 
Freddie Mac rank: 16. 

State: Oklahoma; 
Fannie Mae: $2.275 billion; 
Fannie Mae rank: 26; 
Freddie Mac: $812 million; 
Freddie Mac rank: 34. 

State: Oregon; 
Fannie Mae: $4.446 billion; 
Fannie Mae rank: 19; 
Freddie Mac: $1.887 billion; 
Freddie Mac rank: 24. 

State: Pennsylvania; 
Fannie Mae: $7.869 billion; 
Fannie Mae rank: 8; 
Freddie Mac: $5.379 billion; 
Freddie Mac rank: 12. 

State: Puerto Rico; 
Fannie Mae: $10 million; 
Fannie Mae rank: 53; 
Freddie Mac: $0; 
Freddie Mac rank: 52. 

State: Rhode Island; 
Fannie Mae: $480 million; 
Fannie Mae rank: 42; 
Freddie Mac: $360 million; 
Freddie Mac rank: 40. 

State: South Carolina; 
Fannie Mae: $1.695 billion; 
Fannie Mae rank: 30; 
Freddie Mac: $1.995 billion; 
Freddie Mac rank: 22. 

State: South Dakota; 
Fannie Mae: $280 million; 
Fannie Mae rank: 44; 
Freddie Mac: $126 million; 
Freddie Mac rank: 44. 

State: Tennessee; 
Fannie Mae: $3.178 billion; 
Fannie Mae rank: 21; 
Freddie Mac: $2.916 billion; 
Freddie Mac rank: 18. 

State: Texas; 
Fannie Mae: $24.748 billion; 
Fannie Mae rank: 3; 
Freddie Mac: $22.462 billion; 
Freddie Mac rank: 2. 

State: Utah; 
Fannie Mae: $2.308 billion; 
Fannie Mae rank: 25; 
Freddie Mac: $970 million; 
Freddie Mac rank: 32. 

State: Vermont; 
Fannie Mae: $41 million; 
Fannie Mae rank: 51; 
Freddie Mac: $7 million; 
Freddie Mac rank: 50. 

State: Virginia; 
Fannie Mae: $8.179 billion; 
Fannie Mae rank: 7; 
Freddie Mac: $10.928 billion; 
Freddie Mac rank: 5. 

State: Virgin Islands; 
Fannie Mae: $13 million; 
Fannie Mae rank: 52; 
Freddie Mac: $0; 
Freddie Mac rank: 53. 

State: Washington; 
Fannie Mae: $12.298 billion; 
Fannie Mae rank: 5; 
Freddie Mac: $6.517 billion; 
Freddie Mac rank: 9. 

State: West Virginia; 
Fannie Mae: $100 million; 
Fannie Mae rank: 50; 
Freddie Mac: $94 million; 
Freddie Mac rank: 47. 

State: Wisconsin; 
Fannie Mae: $1.625 billion; 
Fannie Mae rank: 31; 
Freddie Mac: $1.064 billion; 
Freddie Mac rank: 31. 

State: Wyoming; 
Fannie Mae: $130 million; 
Fannie Mae rank: 49; 
Freddie Mac: $31 million; 
Freddie Mac rank: 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. 

[End of table] 

Serious Delinquency Rates for Multifamily Loans with Various 
Underwriting Characteristics: 

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: 1994; 
Fannie Mae: 
Number of multifamily loans with debt-service coverage ratios less 
than 1.25: N/A; 
Percentage of multifamily unpaid principal balance with debt-service 
coverage ratios less than 1.25 that was 60 days or more delinquent: 
N/A; 
Freddie Mac: 
Number of multifamily loans with debt-service coverage ratios less 
than 1.25: 15; 
Percentage of multifamily unpaid principal balance with debt-service 
coverage ratios less than 1.25 that was 60 days or more delinquent: 
0.00%. 

Year: 1995; 
Fannie Mae: 
Number of multifamily loans with debt-service coverage ratios less 
than 1.25: 373; 
Percentage of multifamily unpaid principal balance with debt-service 
coverage ratios less than 1.25 that was 60 days or more delinquent: 
0.00%; 
Freddie Mac: 
Number of multifamily loans with debt-service coverage ratios less 
than 1.25: 25; 
Percentage of multifamily unpaid principal balance with debt-service 
coverage ratios less than 1.25 that was 60 days or more delinquent: 
0.00%. 

Year: 1996; 
Fannie Mae: 
Number of multifamily loans with debt-service coverage ratios less 
than 1.25: 118; 
Percentage of multifamily unpaid principal balance with debt-service 
coverage ratios less than 1.25 that was 60 days or more delinquent: 
0.00%; 
Freddie Mac: 
Number of multifamily loans with debt-service coverage ratios less 
than 1.25: 31; 
Percentage of multifamily unpaid principal balance with debt-service 
coverage ratios less than 1.25 that was 60 days or more delinquent: 
0.00%. 

Year: 1997; 
Fannie Mae: 
Number of multifamily loans with debt-service coverage ratios less 
than 1.25: 200; 
Percentage of multifamily unpaid principal balance with debt-service 
coverage ratios less than 1.25 that was 60 days or more delinquent: 
0.00%; 
Freddie Mac: 
Number of multifamily loans with debt-service coverage ratios less 
than 1.25: 35; 
Percentage of multifamily unpaid principal balance with debt-service 
coverage ratios less than 1.25 that was 60 days or more delinquent: 
0.00%. 

Year: 1998; 
Fannie Mae: 
Number of multifamily loans with debt-service coverage ratios less 
than 1.25: 878; 
Percentage of multifamily unpaid principal balance with debt-service 
coverage ratios less than 1.25 that was 60 days or more delinquent: 
0.09%; 
Freddie Mac: 
Number of multifamily loans with debt-service coverage ratios less 
than 1.25: 36; 
Percentage of multifamily unpaid principal balance with debt-service 
coverage ratios less than 1.25 that was 60 days or more delinquent: 
0.00%. 

Year: 1999; 
Fannie Mae: 
Number of multifamily loans with debt-service coverage ratios less 
than 1.25: 936; 
Percentage of multifamily unpaid principal balance with debt-service 
coverage ratios less than 1.25 that was 60 days or more delinquent: 
0.12%; 
Freddie Mac: 
Number of multifamily loans with debt-service coverage ratios less 
than 1.25: 48; 
Percentage of multifamily unpaid principal balance with debt-service 
coverage ratios less than 1.25 that was 60 days or more delinquent: 
0.00%. 

Year: 2000; 
Fannie Mae: 
Number of multifamily loans with debt-service coverage ratios less 
than 1.25: 1,033; 
Percentage of multifamily unpaid principal balance with debt-service 
coverage ratios less than 1.25 that was 60 days or more delinquent: 
0.00%; 
Freddie Mac: 
Number of multifamily loans with debt-service coverage ratios less 
than 1.25: 55; 
Percentage of multifamily unpaid principal balance with debt-service 
coverage ratios less than 1.25 that was 60 days or more delinquent: 
0.00%. 

Year: 2001; 
Fannie Mae: 
Number of multifamily loans with debt-service coverage ratios less 
than 1.25: 1,131; 
Percentage of multifamily unpaid principal balance with debt-service 
coverage ratios less than 1.25 that was 60 days or more delinquent: 
0.52%; 
Freddie Mac: 
Number of multifamily loans with debt-service coverage ratios less 
than 1.25: 62; 
Percentage of multifamily unpaid principal balance with debt-service 
coverage ratios less than 1.25 that was 60 days or more delinquent: 
0.00%. 

Year: 2002; 
Fannie Mae: 
Number of multifamily loans with debt-service coverage ratios less 
than 1.25: 1,420; 
Percentage of multifamily unpaid principal balance with debt-service 
coverage ratios less than 1.25 that was 60 days or more delinquent: 
0.01%; 
Freddie Mac: 
Number of multifamily loans with debt-service coverage ratios less 
than 1.25: 195; 
Percentage of multifamily unpaid principal balance with debt-service 
coverage ratios less than 1.25 that was 60 days or more delinquent: 
0.00%. 

Year: 2003; 
Fannie Mae: 
Number of multifamily loans with debt-service coverage ratios less 
than 1.25: 1,568; 
Percentage of multifamily unpaid principal balance with debt-service 
coverage ratios less than 1.25 that was 60 days or more delinquent: 
0.50%; 
Freddie Mac: 
Number of multifamily loans with debt-service coverage ratios less 
than 1.25: 193; 
Percentage of multifamily unpaid principal balance with debt-service 
coverage ratios less than 1.25 that was 60 days or more delinquent: 
0.00%. 

Year: 2004; 
Fannie Mae: 
Number of multifamily loans with debt-service coverage ratios less 
than 1.25: 1,829; 
Percentage of multifamily unpaid principal balance with debt-service 
coverage ratios less than 1.25 that was 60 days or more delinquent: 
0.21%; 
Freddie Mac: 
Number of multifamily loans with debt-service coverage ratios less 
than 1.25: 244; 
Percentage of multifamily unpaid principal balance with debt-service 
coverage ratios less than 1.25 that was 60 days or more delinquent: 
0.00%. 

Year: 2005; 
Fannie Mae: 
Number of multifamily loans with debt-service coverage ratios less 
than 1.25: 2,658; 
Percentage of multifamily unpaid principal balance with debt-service 
coverage ratios less than 1.25 that was 60 days or more delinquent: 
0.10%; 
Freddie Mac: 
Number of multifamily loans with debt-service coverage ratios less 
than 1.25: 340; 
Percentage of multifamily unpaid principal balance with debt-service 
coverage ratios less than 1.25 that was 60 days or more delinquent: 
0.00%. 

Year: 2006; 
Fannie Mae: 
Number of multifamily loans with debt-service coverage ratios less 
than 1.25: 3,231; 
Percentage of multifamily unpaid principal balance with debt-service 
coverage ratios less than 1.25 that was 60 days or more delinquent: 
0.07%; 
Freddie Mac: 
Number of multifamily loans with debt-service coverage ratios less 
than 1.25: 436; 
Percentage of multifamily unpaid principal balance with debt-service 
coverage ratios less than 1.25 that was 60 days or more delinquent: 
0.00%. 

Year: 2007; 
Fannie Mae: 
Number of multifamily loans with debt-service coverage ratios less 
than 1.25: 10,459; 
Percentage of multifamily unpaid principal balance with debt-service 
coverage ratios less than 1.25 that was 60 days or more delinquent: 
0.06%; 
Freddie Mac: 
Number of multifamily loans with debt-service coverage ratios less 
than 1.25: 908; 
Percentage of multifamily unpaid principal balance with debt-service 
coverage ratios less than 1.25 that was 60 days or more delinquent: 
0.00%. 

Year: 2008; 
Fannie Mae: 
Number of multifamily loans with debt-service coverage ratios less 
than 1.25: 11,367; 
Percentage of multifamily unpaid principal balance with debt-service 
coverage ratios less than 1.25 that was 60 days or more delinquent: 
0.29%; 
Freddie Mac: 
Number of multifamily loans with debt-service coverage ratios less 
than 1.25: 1,294; 
Percentage of multifamily unpaid principal balance with debt-service 
coverage ratios less than 1.25 that was 60 days or more delinquent: 
0.08%. 

Year: 2009; 
Fannie Mae: 
Number of multifamily loans with debt-service coverage ratios less 
than 1.25: 11,200; 
Percentage of multifamily unpaid principal balance with debt-service 
coverage ratios less than 1.25 that was 60 days or more delinquent: 
0.82%; 
Freddie Mac: 
Number of multifamily loans with debt-service coverage ratios less 
than 1.25: 1,400; 
Percentage of multifamily unpaid principal balance with debt-service 
coverage ratios less than 1.25 that was 60 days or more delinquent: 
0.8%2. 

Year: 2010; 
Fannie Mae: 
Number of multifamily loans with debt-service coverage ratios less 
than 1.25: 10,710; 
Percentage of multifamily unpaid principal balance with debt-service 
coverage ratios less than 1.25 that was 60 days or more delinquent: 
0.77%; 
Freddie Mac: 
Number of multifamily loans with debt-service coverage ratios less 
than 1.25: 1,421; 
Percentage of multifamily unpaid principal balance with debt-service 
coverage ratios less than 1.25 that was 60 days or more delinquent: 
0.82%. 

Year: 2011; 
Fannie Mae: 
Number of multifamily loans with debt-service coverage ratios less 
than 1.25: 10,019; 
Percentage of multifamily unpaid principal balance with debt-service 
coverage ratios less than 1.25 that was 60 days or more delinquent: 
0.82%; 
Freddie Mac: 
Number of multifamily loans with debt-service coverage ratios less 
than 1.25: 1,405; 
Percentage of multifamily unpaid principal balance with debt-service 
coverage ratios less than 1.25 that was 60 days or more delinquent: 
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 debt-service coverage ratio of 1.25. 
However, for certain asset classes, the ratio may be less than 1.25. 

[End of table] 

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. 

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: 1994; 
Fannie Mae:
Number of multifamily loans with debt-service coverage ratios greater 
than or equal to 1.25: N/A; 
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: N/A; 
Freddie Mac: 
Number of multifamily loans with debt-service coverage ratios greater 
than or equal to 1.25: 107; 
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: 0.00%. 

Year: 1995; 
Fannie Mae: 
Number of multifamily loans with debt-service coverage ratios greater 
than or equal to 1.25: 628; 
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: 0.00%; 
Freddie Mac: 
Number of multifamily loans with debt-service coverage ratios greater 
than or equal to 1.25: 329; 
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: 0.00%. 

Year: 1996; 
Fannie Mae: 
Number of multifamily loans with debt-service coverage ratios greater 
than or equal to 1.25: 1,106; 
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: 0.09%; 
Freddie Mac: 
Number of multifamily loans with debt-service coverage ratios greater 
than or equal to 1.25: 700; 
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: 0.04%. 

Year: 1997; 
Fannie Mae: 
Number of multifamily loans with debt-service coverage ratios greater 
than or equal to 1.25: 2,102; 
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: 0.12%; 
Freddie Mac: 
Number of multifamily loans with debt-service coverage ratios greater 
than or equal to 1.25: 1,015; 
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: 0.00%. 

Year: 1998; 
Fannie Mae: 
Number of multifamily loans with debt-service coverage ratios greater 
than or equal to 1.25: 4,921; 
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: 0.04%; 
Freddie Mac: 
Number of multifamily loans with debt-service coverage ratios greater 
than or equal to 1.25: 1,585; 
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: 0.00%. 

Year: 1999; 
Fannie Mae: 
Number of multifamily loans with debt-service coverage ratios greater 
than or equal to 1.25: 6,071; 
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: 0.01%; 
Freddie Mac: 
Number of multifamily loans with debt-service coverage ratios greater 
than or equal to 1.25: 2,232; 
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: 0.09%. 

Year: 2000; 
Fannie Mae: 
Number of multifamily loans with debt-service coverage ratios greater 
than or equal to 1.25: 6,900; 
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: 0.08%; 
Freddie Mac: 
Number of multifamily loans with debt-service coverage ratios greater 
than or equal to 1.25: 2,647; 
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: 0.00%. 

Year: 2001; 
Fannie Mae: 
Number of multifamily loans with debt-service coverage ratios greater 
than or equal to 1.25: 9,216; 
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: 0.29%; 
Freddie Mac: 
Number of multifamily loans with debt-service coverage ratios greater 
than or equal to 1.25: 3,318; 
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: 0.19%. 

Year: 2002; 
Fannie Mae: 
Number of multifamily loans with debt-service coverage ratios greater 
than or equal to 1.25: 16,336; 
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: 0.05%; 
Freddie Mac: 
Number of multifamily loans with debt-service coverage ratios greater 
than or equal to 1.25: 4,408; 
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: 0.14%. 

Year: 2003; 
Fannie Mae: 
Number of multifamily loans with debt-service coverage ratios greater 
than or equal to 1.25: 32,114; 
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: 0.29%; 
Freddie Mac: 
Number of multifamily loans with debt-service coverage ratios greater 
than or equal to 1.25: 4,886; 
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: 0.06%. 

Year: 2004; 
Fannie Mae: 
Number of multifamily loans with debt-service coverage ratios greater 
than or equal to 1.25: 31,499; 
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: 0.10%; 
Freddie Mac: 
Number of multifamily loans with debt-service coverage ratios greater 
than or equal to 1.25: 5,244; 
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: 0.08%. 

Year: 2005; 
Fannie Mae: 
Number of multifamily loans with debt-service coverage ratios greater 
than or equal to 1.25: 32,353; 
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: 0.35%; 
Freddie Mac: 
Number of multifamily loans with debt-service coverage ratios greater 
than or equal to 1.25: 5,385; 
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: 0.00%. 

Year: 2006; 
Fannie Mae: 
Number of multifamily loans with debt-service coverage ratios greater 
than or equal to 1.25: 24,893; 
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: 0.08%; 
Freddie Mac: 
Number of multifamily loans with debt-service coverage ratios greater 
than or equal to 1.25: 5,397; 
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: 0.06%. 

Year: 2007; 
Fannie Mae: 
Number of multifamily loans with debt-service coverage ratios greater 
than or equal to 1.25: 25,492; 
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: 0.08%; 
Freddie Mac: 
Number of multifamily loans with debt-service coverage ratios greater 
than or equal to 1.25: 6,005; 
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: 0.02%. 

Year: 2008; 
Fannie Mae: 
Number of multifamily loans with debt-service coverage ratios greater 
than or equal to 1.25: 28,034; 
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: 0.30%; 
Freddie Mac: 
Number of multifamily loans with debt-service coverage ratios greater 
than or equal to 1.25: 6,914; 
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: 0.02%. 

Year: 2009; 
Fannie Mae: 
Number of multifamily loans with debt-service coverage ratios greater 
than or equal to 1.25: 28,594; 
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: 0.52%; 
Freddie Mac: 
Number of multifamily loans with debt-service coverage ratios greater 
than or equal to 1.25: 7,636; 
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: 0.08%. 

Year: 2010; 
Fannie Mae: 
Number of multifamily loans with debt-service coverage ratios greater 
than or equal to 1.25: 28,804; 
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: 0.67%; 
Freddie Mac: 
Number of multifamily loans with debt-service coverage ratios greater 
than or equal to 1.25: 8,110; 
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: 0.17%. 

Year: 2011; 
Fannie Mae: 
Number of multifamily loans with debt-service coverage ratios greater 
than or equal to 1.25: 28,211; 
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: 0.48%; 
Freddie Mac:
Number of multifamily loans with debt-service coverage ratios greater 
than or equal to 1.25: 8,515; 
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: 0.12%. 

Source: GAO analysis of data from Fannie Mae and Freddie Mac. 

N/A = not applicable. 

[End of table] 

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. 

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: 1994; 
Fannie Mae: 
Number of multifamily loans with LTV ratios less than or equal to 80 
percent: 2; 
Percentage of multifamily unpaid principal balance with LTV ratios 
less than or equal to 80 percent that was 60 days or more delinquent: 
0.00%; 
Freddie Mac: 
Number of multifamily loans with LTV ratios less than or equal to 80 
percent: 122; 
Percentage of multifamily unpaid principal balance with LTV ratios 
less than or equal to 80 percent that was 60 days or more delinquent: 
0.00%. 

Year: 1995; 
Fannie Mae: 
Number of multifamily loans with LTV ratios less than or equal to 80 
percent: 974; 
Percentage of multifamily unpaid principal balance with LTV ratios 
less than or equal to 80 percent that was 60 days or more delinquent: 
0.00%; 
Freddie Mac:
Number of multifamily loans with LTV ratios less than or equal to 80 
percent: 355; 
Percentage of multifamily unpaid principal balance with LTV ratios 
less than or equal to 80 percent that was 60 days or more delinquent: 
0.00%. 

Year: 1996; 
Fannie Mae: 
Number of multifamily loans with LTV ratios less than or equal to 80 
percent: 1,128; 
Percentage of multifamily unpaid principal balance with LTV ratios 
less than or equal to 80 percent that was 60 days or more delinquent: 
0.09%; 
Freddie Mac: 
Number of multifamily loans with LTV ratios less than or equal to 80 
percent: 732; 
Percentage of multifamily unpaid principal balance with LTV ratios 
less than or equal to 80 percent that was 60 days or more delinquent: 
0.04%. 

Year: 1997; 
Fannie Mae: 
Number of multifamily loans with LTV ratios less than or equal to 80 
percent: 2,122; 
Percentage of multifamily unpaid principal balance with LTV ratios 
less than or equal to 80 percent that was 60 days or more delinquent: 
0.12%; 
Freddie Mac: 
Number of multifamily loans with LTV ratios less than or equal to 80 
percent: 1,048; 
Percentage of multifamily unpaid principal balance with LTV ratios 
less than or equal to 80 percent that was 60 days or more delinquent: 
0.00%. 

Year: 1998; 
Fannie Mae: 
Number of multifamily loans with LTV ratios less than or equal to 80 
percent: 5,561; 
Percentage of multifamily unpaid principal balance with LTV ratios 
less than or equal to 80 percent that was 60 days or more delinquent: 
0.04%; 
Freddie Mac: 
Number of multifamily loans with LTV ratios less than or equal to 80 
percent: 1,613; 
Percentage of multifamily unpaid principal balance with LTV ratios 
less than or equal to 80 percent that was 60 days or more delinquent: 
0.00%. 

Year: 1999; 
Fannie Mae: 
Number of multifamily loans with LTV ratios less than or equal to 80 
percent: 6,613; 
Percentage of multifamily unpaid principal balance with LTV ratios 
less than or equal to 80 percent that was 60 days or more delinquent: 
0.01%; 
Freddie Mac: 
Number of multifamily loans with LTV ratios less than or equal to 80 
percent: 2,262; 
Percentage of multifamily unpaid principal balance with LTV ratios 
less than or equal to 80 percent that was 60 days or more delinquent: 
0.09%. 

Year: 2000; 
Fannie Mae: 
Number of multifamily loans with LTV ratios less than or equal to 80 
percent: 7,468; 
Percentage of multifamily unpaid principal balance with LTV ratios 
less than or equal to 80 percent that was 60 days or more delinquent: 
0.08%; 
Freddie Mac: 
Number of multifamily loans with LTV ratios less than or equal to 80 
percent: 2,682; 
Percentage of multifamily unpaid principal balance with LTV ratios 
less than or equal to 80 percent that was 60 days or more delinquent: 
0.00%. 

Year: 2001; 
Fannie Mae: 
Number of multifamily loans with LTV ratios less than or equal to 80 
percent: 9,773; 
Percentage of multifamily unpaid principal balance with LTV ratios 
less than or equal to 80 percent that was 60 days or more delinquent: 
0.30%; 
Freddie Mac: 
Number of multifamily loans with LTV ratios less than or equal to 80 
percent: 3,355; 
Percentage of multifamily unpaid principal balance with LTV ratios 
less than or equal to 80 percent that was 60 days or more delinquent: 
0.19%. 

Year: 2002; 
Fannie Mae: 
Number of multifamily loans with LTV ratios less than or equal to 80 
percent: 16,784; 
Percentage of multifamily unpaid principal balance with LTV ratios 
less than or equal to 80 percent that was 60 days or more delinquent: 
0.05%; 
Freddie Mac: 
Number of multifamily loans with LTV ratios less than or equal to 80 
percent: 7,367; 
Percentage of multifamily unpaid principal balance with LTV ratios 
less than or equal to 80 percent that was 60 days or more delinquent: 
0.14%. 

Year: 2003; 
Fannie Mae: 
Number of multifamily loans with LTV ratios less than or equal to 80 
percent: 32,353; 
Percentage of multifamily unpaid principal balance with LTV ratios 
less than or equal to 80 percent that was 60 days or more delinquent: 
0.28%; 
Freddie Mac: 
Number of multifamily loans with LTV ratios less than or equal to 80 
percent: 17,547; 
Percentage of multifamily unpaid principal balance with LTV ratios 
less than or equal to 80 percent that was 60 days or more delinquent: 
0.01%. 

Year: 2004; 
Fannie Mae:
Number of multifamily loans with LTV ratios less than or equal to 80 
percent: 31,956; 
Percentage of multifamily unpaid principal balance with LTV ratios 
less than or equal to 80 percent that was 60 days or more delinquent: 
0.11%; 
Freddie Mac: 
Number of multifamily loans with LTV ratios less than or equal to 80 
percent: 16,196; 
Percentage of multifamily unpaid principal balance with LTV ratios 
less than or equal to 80 percent that was 60 days or more delinquent: 
0.03%. 

Year: 2005; 
Fannie Mae: 
Number of multifamily loans with LTV ratios less than or equal to 80 
percent: 35,103; 
Percentage of multifamily unpaid principal balance with LTV ratios 
less than or equal to 80 percent that was 60 days or more delinquent: 
0.32%; 
Freddie Mac: 
Number of multifamily loans with LTV ratios less than or equal to 80 
percent: 14,432; 
Percentage of multifamily unpaid principal balance with LTV ratios 
less than or equal to 80 percent that was 60 days or more delinquent: 
0.00%. 

Year: 2006; 
Fannie Mae: 
Number of multifamily loans with LTV ratios less than or equal to 80 
percent: 29,572; 
Percentage of multifamily unpaid principal balance with LTV ratios 
less than or equal to 80 percent that was 60 days or more delinquent: 
0.05%; 
Freddie Mac:
Number of multifamily loans with LTV ratios less than or equal to 80 
percent: 6,249; 
Percentage of multifamily unpaid principal balance with LTV ratios 
less than or equal to 80 percent that was 60 days or more delinquent: 
0.00%. 

Year: 2007; 
Fannie Mae: 
Number of multifamily loans with LTV ratios less than or equal to 80 
percent: 34,506; 
Percentage of multifamily unpaid principal balance with LTV ratios 
less than or equal to 80 percent that was 60 days or more delinquent: 
0.06%; 
Freddie Mac: 
Number of multifamily loans with LTV ratios less than or equal to 80 
percent: 7,066; 
Percentage of multifamily unpaid principal balance with LTV ratios 
less than or equal to 80 percent that was 60 days or more delinquent: 
0.02%. 

Year: 2008; 
Fannie Mae: 
Number of multifamily loans with LTV ratios less than or equal to 80 
percent: 37,958; 
Percentage of multifamily unpaid principal balance with LTV ratios 
less than or equal to 80 percent that was 60 days or more delinquent: 
0.27%; 
Freddie Mac: 
Number of multifamily loans with LTV ratios less than or equal to 80 
percent: 8,108; 
Percentage of multifamily unpaid principal balance with LTV ratios 
less than or equal to 80 percent that was 60 days or more delinquent: 
0.00%. 

Year: 2009; 
Fannie Mae: 
Number of multifamily loans with LTV ratios less than or equal to 80 
percent: 38,369; 
Percentage of multifamily unpaid principal balance with LTV ratios 
less than or equal to 80 percent that was 60 days or more delinquent: 
0.62%; 
Freddie Mac: 
Number of multifamily loans with LTV ratios less than or equal to 80 
percent: 8,876; 
Percentage of multifamily unpaid principal balance with LTV ratios 
less than or equal to 80 percent that was 60 days or more delinquent: 
0.10%. 

Year: 2010; 
Fannie Mae: 
Number of multifamily loans with LTV ratios less than or equal to 80 
percent: 38,126; 
Percentage of multifamily unpaid principal balance with LTV ratios 
less than or equal to 80 percent that was 60 days or more delinquent: 
0.71%; 
Freddie Mac: 
Number of multifamily loans with LTV ratios less than or equal to 80 
percent: 9,322; 
Percentage of multifamily unpaid principal balance with LTV ratios 
less than or equal to 80 percent that was 60 days or more delinquent: 
0.13%. 

Year: 2011; 
Fannie Mae: 
Number of multifamily loans with LTV ratios less than or equal to 80 
percent: 36,885; 
Percentage of multifamily unpaid principal balance with LTV ratios 
less than or equal to 80 percent that was 60 days or more delinquent: 
0.49%; 
Freddie Mac: 
Number of multifamily loans with LTV ratios less than or equal to 80 
percent: 9,680; 
Percentage of multifamily unpaid principal balance with LTV ratios 
less than or equal to 80 percent that was 60 days or more delinquent: 
0.10%. 

Source: GAO analysis of data from Fannie Mae and Freddie Mac. 

[End of table] 

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. 

Table 18: Fannie Mae and Freddie Mac's Serious Delinquency Rates for 
Multifamily Loans with LTV Ratios Greater Than 80 Percent: 

Year: 1994; 
Fannie Mae: 
Number of multifamily loans with LTV ratios greater than 80 percent: 0; 
Percentage of multifamily unpaid principal balance with LTV ratios 
greater than 80 percent that was 60 days or more delinquent: 0.00%; 
Freddie Mac: 
Number of multifamily loans with LTV ratios greater than 80 percent: 1; 
Percentage of multifamily unpaid principal balance with LTV ratios 
greater than 80 percent that was 60 days or more delinquent: 0.00%. 

Year: 1995; 
Fannie Mae: 
Number of multifamily loans with LTV ratios greater than 80 percent: 
17; 
Percentage of multifamily unpaid principal balance with LTV ratios 
greater than 80 percent that was 60 days or more delinquent: 0.00%; 
Freddie Mac: 
Number of multifamily loans with LTV ratios greater than 80 percent: 2; 
Percentage of multifamily unpaid principal balance with LTV ratios 
greater than 80 percent that was 60 days or more delinquent: 0.00%. 

Year: 1996; 
Fannie Mae: 
Number of multifamily loans with LTV ratios greater than 80 percent: 
53; 
Percentage of multifamily unpaid principal balance with LTV ratios 
greater than 80 percent that was 60 days or more delinquent: 0.00%; 
Freddie Mac: 
Number of multifamily loans with LTV ratios greater than 80 percent: 2; 
Percentage of multifamily unpaid principal balance with LTV ratios 
greater than 80 percent that was 60 days or more delinquent: 0.00%. 

Year: 1997; 
Fannie Mae: 
Number of multifamily loans with LTV ratios greater than 80 percent: 
134; 
Percentage of multifamily unpaid principal balance with LTV ratios 
greater than 80 percent that was 60 days or more delinquent: 0.00%; 
Freddie Mac: 
Number of multifamily loans with LTV ratios greater than 80 percent: 5; 
Percentage of multifamily unpaid principal balance with LTV ratios 
greater than 80 percent that was 60 days or more delinquent: 0.00%. 

Year: 1998; 
Fannie Mae: 
Number of multifamily loans with LTV ratios greater than 80 percent: 
485; 
Percentage of multifamily unpaid principal balance with LTV ratios 
greater than 80 percent that was 60 days or more delinquent: 0.00%; 
Freddie Mac: 
Number of multifamily loans with LTV ratios greater than 80 percent: 
11; 
Percentage of multifamily unpaid principal balance with LTV ratios 
greater than 80 percent that was 60 days or more delinquent: 0.00%. 

Year: 1999; 
Fannie Mae: 
Number of multifamily loans with LTV ratios greater than 80 percent: 
569; 
Percentage of multifamily unpaid principal balance with LTV ratios 
greater than 80 percent that was 60 days or more delinquent: 0.13%; 
Freddie Mac: 
Number of multifamily loans with LTV ratios greater than 80 percent: 
22; 
Percentage of multifamily unpaid principal balance with LTV ratios 
greater than 80 percent that was 60 days or more delinquent: 0.00%. 

Year: 2000; 
Fannie Mae: 
Number of multifamily loans with LTV ratios greater than 80 percent: 
686; 
Percentage of multifamily unpaid principal balance with LTV ratios 
greater than 80 percent that was 60 days or more delinquent: 0.00%; 
Freddie Mac: 
Number of multifamily loans with LTV ratios greater than 80 percent: 
23; 
Percentage of multifamily unpaid principal balance with LTV ratios 
greater than 80 percent that was 60 days or more delinquent: 0.00%. 

Year: 2001; 
Fannie Mae: 
Number of multifamily loans with LTV ratios greater than 80 percent: 
787; 
Percentage of multifamily unpaid principal balance with LTV ratios 
greater than 80 percent that was 60 days or more delinquent: 0.56%; 
Freddie Mac: 
Number of multifamily loans with LTV ratios greater than 80 percent: 
28; 
Percentage of multifamily unpaid principal balance with LTV ratios 
greater than 80 percent that was 60 days or more delinquent: 0.00%. 

Year: 2002; 
Fannie Mae: 
Number of multifamily loans with LTV ratios greater than 80 percent: 
1,078; 
Percentage of multifamily unpaid principal balance with LTV ratios 
greater than 80 percent that was 60 days or more delinquent: 0.00%; 
Freddie Mac: 
Number of multifamily loans with LTV ratios greater than 80 percent: 
271; 
Percentage of multifamily unpaid principal balance with LTV ratios 
greater than 80 percent that was 60 days or more delinquent: 0.00%. 

Year: 2003; 
Fannie Mae: 
Number of multifamily loans with LTV ratios greater than 80 percent: 
1,336; 
Percentage of multifamily unpaid principal balance with LTV ratios 
greater than 80 percent that was 60 days or more delinquent: 0.78%; 
Freddie Mac: 
Number of multifamily loans with LTV ratios greater than 80 percent: 
362; 
Percentage of multifamily unpaid principal balance with LTV ratios 
greater than 80 percent that was 60 days or more delinquent: 0.59%. 

Year: 2004; 
Fannie Mae: 
Number of multifamily loans with LTV ratios greater than 80 percent: 
1,335; 
Percentage of multifamily unpaid principal balance with LTV ratios 
greater than 80 percent that was 60 days or more delinquent: 0.21%; 
Freddie Mac:
Number of multifamily loans with LTV ratios greater than 80 percent: 
421; 
Percentage of multifamily unpaid principal balance with LTV ratios 
greater than 80 percent that was 60 days or more delinquent: 0.61%. 

Year: 2005; 
Fannie Mae: 
Number of multifamily loans with LTV ratios greater than 80 percent: 
1,363; 
Percentage of multifamily unpaid principal balance with LTV ratios 
greater than 80 percent that was 60 days or more delinquent: 0.37%; 
Freddie Mac: 
Number of multifamily loans with LTV ratios greater than 80 percent: 
451; 
Percentage of multifamily unpaid principal balance with LTV ratios 
greater than 80 percent that was 60 days or more delinquent: 0.00%. 

Year: 2006; 
Fannie Mae: 
Number of multifamily loans with LTV ratios greater than 80 percent: 
1,327; 
Percentage of multifamily unpaid principal balance with LTV ratios 
greater than 80 percent that was 60 days or more delinquent: 0.44%; 
Freddie Mac: 
Number of multifamily loans with LTV ratios greater than 80 percent: 
387; 
Percentage of multifamily unpaid principal balance with LTV ratios 
greater than 80 percent that was 60 days or more delinquent: 0.91%. 

Year: 2007; 
Fannie Mae: 
Number of multifamily loans with LTV ratios greater than 80 percent: 
1,378; 
Percentage of multifamily unpaid principal balance with LTV ratios 
greater than 80 percent that was 60 days or more delinquent: 0.32%; 
Freddie Mac: 
Number of multifamily loans with LTV ratios greater than 80 percent: 
534; 
Percentage of multifamily unpaid principal balance with LTV ratios 
greater than 80 percent that was 60 days or more delinquent: 0.00%. 

Year: 2008; 
Fannie Mae: 
Number of multifamily loans with LTV ratios greater than 80 percent: 
1,383; 
Percentage of multifamily unpaid principal balance with LTV ratios 
greater than 80 percent that was 60 days or more delinquent: 0.89%; 
Freddie Mac: 
Number of multifamily loans with LTV ratios greater than 80 percent: 
698; 
Percentage of multifamily unpaid principal balance with LTV ratios 
greater than 80 percent that was 60 days or more delinquent: 0.46%. 

Year: 2009; 
Fannie Mae: 
Number of multifamily loans with LTV ratios greater than 80 percent: 
1,363; 
Percentage of multifamily unpaid principal balance with LTV ratios 
greater than 80 percent that was 60 days or more delinquent: 0.56%; 
Freddie Mac: 
Number of multifamily loans with LTV ratios greater than 80 percent: 
729; 
Percentage of multifamily unpaid principal balance with LTV ratios 
greater than 80 percent that was 60 days or more delinquent: 1.58%. 

Year: 2010; 
Fannie Mae: 
Number of multifamily loans with LTV ratios greater than 80 percent: 
1,328; 
Percentage of multifamily unpaid principal balance with LTV ratios 
greater than 80 percent that was 60 days or more delinquent: 0.56%; 
Freddie Mac: 
Number of multifamily loans with LTV ratios greater than 80 percent: 
754; 
Percentage of multifamily unpaid principal balance with LTV ratios 
greater than 80 percent that was 60 days or more delinquent: 2.36%. 

Year: 2011; 
Fannie Mae: 
Number of multifamily loans with LTV ratios greater than 80 percent: 
1,290; 
Percentage of multifamily unpaid principal balance with LTV ratios 
greater than 80 percent that was 60 days or more delinquent: 2.91%; 
Freddie Mac: 
Number of multifamily loans with LTV ratios greater than 80 percent: 
742; 
Percentage of multifamily unpaid principal balance with LTV ratios 
greater than 80 percent that was 60 days or more delinquent: 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. 

[End of table] 

Multifamily Administrative Costs: 

The enterprises' administrative costs associated with their 
multifamily business from 2002 through 2011 are shown in table 19. 

Table 19: Fannie Mae and Freddie Mac's Multifamily Administrative 
Costs, 2002-2011: 

Year: 2002; 
Fannie Mae: $192 million; 
Freddie Mac: No data. 

Year: 2003; 
Fannie Mae: $236 million; 
Freddie Mac: No data. 

Year: 2004; 
Fannie Mae: $270 million; 
Freddie Mac: No data. 

Year: 2005; 
Fannie Mae: $424 million; 
Freddie Mac: $151 million. 

Year: 2006; 
Fannie Mae: $597 million; 
Freddie Mac: $182 million. 

Year: 2007; 
Fannie Mae: $548 million; 
Freddie Mac: $189 million. 

Year: 2008; 
Fannie Mae: $404 million; 
Freddie Mac: $190 million. 

Year: 2009; 
Fannie Mae: $363 million; 
Freddie Mac: $221 million. 

Year: 2010; 
Fannie Mae: $383 million; 
Freddie Mac: $212 million. 

Year: 2011; 
Fannie Mae: $264 million; 
Freddie Mac: $220 million. 

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. 

[End of table] 

[End of section] 

Appendix IV: Enterprises' Multifamily Loan and Property Sizes Compared 
with Other Market Participants: 

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: 2005; 
Median loan size: 
Fannie Mae: $629,000; 
Freddie Mac: $7,450,000; 
Life insurance companies: $10,800,000; 
CMBS lenders: $5,400,000; 
Median number of units: 
Fannie Mae[A]: 13; 
Freddie Mac: 196; 
Life insurance companies: 210; 
CMBS lenders: 144. 

Acquisition or origination year: 2006; 
Fannie Mae: $1,179,000; 
Freddie Mac: $8,450,000; 
Life insurance companies: $13,800,000; 
CMBS lenders: $6,268,000; 
Median number of units: 
Fannie Mae[A]: 24; 
Freddie Mac: 200; 
Life insurance companies: 236; 
CMBS lenders: 154. 

Acquisition or origination year: 2007; 
Fannie Mae: $691,000; 
Freddie Mac: $7,768,000; 
Life insurance companies: $13,840,000; 
CMBS lenders: $7,200,000; 
Median number of units: 
Fannie Mae[A]: 15; 
Freddie Mac: 192; 
Life insurance companies: 224; 
CMBS lenders: 144. 

Acquisition or origination year: 2008; 
Fannie Mae: $1,836,000; 
Freddie Mac: $9,000,000; 
Life insurance companies: $6,800,000; 
CMBS lenders: $4,187,000; 
Median number of units: 
Fannie Mae[A]: 44; 
Freddie Mac: 200; 
Life insurance companies: 144; 
CMBS lenders: 120. 

Acquisition or origination year: 2009; 
Fannie Mae: $3,280,000; 
Freddie Mac: $10,170,000; 
Life insurance companies: $4,850,000; 
CMBS lenders: [B]; 
Median number of units: 
Fannie Mae[A]: 92; 
Freddie Mac: 217; 
Life insurance companies: 144; 
CMBS lenders: [B]. 

Acquisition or origination year: 2010; 
Fannie Mae: $3,500,000; 
Freddie Mac: $10,500,000; 
Life insurance companies: $12,500,000; 
CMBS lenders: $1,424,000; 
Median number of units: 
Fannie Mae[A]: 85; 
Freddie Mac: 199; 
Life insurance companies: 228; 
CMBS lenders: 66. 

Acquisition or origination year: 2011; 
Fannie Mae: $4,365,000; 
Freddie Mac: $11,500,000; 
Life insurance companies: $13,000,000; 
CMBS lenders: $9,040,000; 
Median number of units: 
Fannie Mae[A]: 102; 
Freddie Mac: 212; 
Life insurance companies: 207; 
CMBS lenders: 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. 

[End of table] 

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.[Footnote 101] 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 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.[Footnote 102] During 
this period, the median number of multifamily units supported by RHS 
ranged from 44 to 50. 

Table 21: Median Loan Size and Number of Units for Loans Originated by 
Selected Housing Finance Agencies, 2005-2011: 

Origination year: 2005; 
Median loan size: 
HFA 1: N/A; 
HFA 2: $4,472,000; 
HFA 3: $391,000; 
HFA 4: $165,000; 
HFA 5: $3,750,000; 
HFA 6: $11,523,000; 
Median number of units: 
HFA 1: N/A; 
HFA 2: 175; 
HFA3: 58; 
HFA 4: 18; 
HFA 5: 70; 
HFA 6: 125. 

Origination year: 2006; 
Median loan size: 
HFA 1: N/A; 
HFA 2: $4,825,000; 
HFA 3: $508,000; 
HFA 4: $308,000; 
HFA 5: $2,320,000; 
HFA 6: $10,340,000; 
Median number of units: 
HFA 1: N/A; 
HFA 2: 92; 
HFA3: 60; 
HFA 4: 13; 
HFA 5: 63; 
HFA 6: 104. 

Origination year: 2007; 
Median loan size: 
HFA 1: $3,000,000; 
HFA 2: $6,773,000; 
HFA 3: $344,000; 
HFA 4: $215,000; 
HFA 5: $1,703,000; 
HFA 6: $26,000,000; 
Median number of units: 
HFA 1: 76; 
HFA 2: 109; 
HFA 3: 60; 
HFA 4: 16; 
HFA 5: 57; 
HFA 6: 230. 

Origination year: 2008; 
Median loan size: 
HFA 1: $8,150,000; 
HFA 2: $5,695,000; 
HFA 3: $3,081,000; 
HFA 4: $200,000; 
HFA 5: $2,350,000; 
HFA 6: $8,530,000; 
Median number of units: 
HFA 1: 106; 
HFA 2: 102; 
HFA3: 95; 
HFA 4: 14; 
HFA 5: 80; 
HFA 6: 78. 

Origination year: 2009; 
Median loan size: 
HFA 1: $7,502,000; 
HFA 2: $5,430,000; 
HFA 3: [A]; 
HFA 4: $1,750,000; 
HFA 5: $3,133,000; 
HFA 6: $16,695,000; 
Median number of units: 
HFA 1: 160; 
HFA 2: 98; 
HFA3: [A]; 
HFA 4: 27; 
HFA 5: 75; 
HFA 6: 130. 

Origination year: 2010; 
Median loan size: 
HFA 1: $7,345,000; 
HFA 2: $4,680,000; 
HFA 3: $790,000; 
HFA 4: $1,500,000; 
HFA 5: N/A; 
HFA 6: $10,620,000; 
Median number of units: 
HFA 1: 101; 
HFA 2: 105; 
HFA3: 40; 
HFA 4: 16; 
HFA 5: N/A; 
HFA 6: 107. 

Origination year: 2011; 
Median loan size: 
HFA 1: $5,203,000; 
HFA 2: $4,880,000; 
HFA 3: [A]; 
HFA 4: $1,100,000; 
HFA 5: $1,600,000; 
HFA 6: $12,377,000; 
Median number of units: 
HFA 1: 96; 
HFA 2: 100; 
HFA 3: [A]; 
HFA 4: 12; 
HFA 5: 50; 
HFA 6: 98. 

Sources: Selected housing finance agencies. 

N/A = data not available: 

[A] HFA had no loans in 2009 and 2011. 

[End of table] 

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). 

Table 22: Median Loan Size and Number of Units for Loans Originated by 
Selected Loan Consortiums, 2005-2011: 

Origination year: 2005; 
Median loan size: 
LC 1: $284,000; 
LC 2: $1,090,000; 
Median number of units: 
LC 1: 12; 
LC 2: 31. 

Origination year: 2006; 
Median loan size: 
LC 1: $421,000; 
LC 2: $865,000; 
Median number of units: 
LC 1: 18; 
LC 2: 18. 

Origination year: 2007; 
Median loan size: 
LC 1: $520,000; 
LC 2: $1,620,000; 
Median number of units: 
LC 1: 18; 
LC 2: 43. 

Origination year: 2008; 
Median loan size: 
LC 1: $625,000; 
LC 2: $1,480,000; 
Median number of units: 
LC 1: 21; 
LC 2: 35. 

Origination year: 2009; 
Median loan size: 
LC 1: $460,000; 
LC 2: $749,000; 
Median number of units: 
LC 1: 17; 
LC 2: 24. 

Origination year: 2010; 
Median loan size: 
LC 1: $343,000; 
LC 2: $745,000; 
Median number of units: 
LC 1: 15; 
LC 2: 40. 

Origination year: 2011; 
Median loan size: 
LC 1: $289,000; 
LC 2: $1,500,000; 
Median number of units: 
LC 1: 12; 
LC 2: 36. 

Sources: Selected loan consortiums. 

[End of table] 

[End of section] 

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

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 debt-service 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: 2005; 
Median debt-service coverage ratio: 
HFA 1: N/A; 
HFA 2: 1.21; 
HFA 3: 0.92; 
HFA 4: 1.15; 
HFA 5: N/A; 
HFA 6: 1.16; 
Median LTV ratio: 
HFA 1: 90%; 
HFA 2: 44%; 
HFA 3: 7%; 
HFA 4: 78%; 
HFA 5: 53%; 
HFA 6: 68%. 

Origination year: 2006; 
Median debt-service coverage ratio: 
HFA 1: N/A; 
HFA 2: 1.20; 
HFA 3: 1.72; 
HFA 4: 1.15; 
HFA 5: N/A; 
HFA 6: 1.20; 
Median LTV ratio: 
HFA 1: 90; 
HFA 2: 60; 
HFA 3: 6; 
HFA 4: 65; 
HFA 5: 33; 
HFA 6: 75. 

Origination year: 2007; 
Median debt-service coverage ratio: 
HFA 1: 1.15; 
HFA 2: 1.30; 
HFA 3: 1.11; 
HFA 4: 1.15; 
HFA 5: N/A; 
HFA 6: 1.13; 
Median LTV ratio: 
HFA 1: 90; 
HFA 2: 62; 
HFA 3: 4; 
HFA 4: 79; 
HFA 5: 47; 
HFA 6: 67. 

Origination year: 2008; 
Median debt-service coverage ratio: 
HFA 1: 1.15; 
HFA 2: 1.57; 
HFA 3: 0.97; 
HFA 4: 1.15; 
HFA 5: N/A; 
HFA 6: 1.21; 
Median LTV ratio: 
HFA 1: 90; 
HFA 2: 58; 
HFA 3: 16; 
HFA 4: 48; 
HFA 5: 36; 
HFA 6: 71. 

Origination year: 2009; 
Median debt-service coverage ratio: 
HFA 1: 1.25; 
HFA 2: 1.18; 
HFA 3: N/A; 
HFA 4: 1.15; 
HFA 5: N/A; 
HFA 6: 1.11; 
Median LTV ratio: 
HFA 1: 90; 
HFA 2: 57; 
HFA 3: N/A; 
HFA 4: 58; 
HFA 5: 62; 
HFA 6: 77. 

Origination year: 2010; 
Median debt-service coverage ratio: 
HFA 1: 1.25; 
HFA 2: 1.23; 
HFA 3: 1.10; 
HFA 4: 1.15; 
HFA 5: N/A; 
HFA 6: 1.27; 
Median LTV ratio: 
HFA 1: 90; 
HFA 2: 31; 
HFA 3: 11; 
HFA 4: 94; 
HFA 5: N/A; 
HFA 6: 64. 

Origination year: 2011; 
Median debt-service coverage ratio: 
HFA 1: 1.20; 
HFA 2: 1.15; 
HFA 3: N/A ; 
HFA 4: 1.15; 
HFA 5: N/A; 
HFA 6: 1.17; 
Median LTV ratio: 
HFA 1: 90; 
HFA 2: 32; 
HFA 3: N/A ; 
HFA 4: 43; 
HFA 5: 70; 
HFA 6: 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. 

[End of table] 

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: 2005; 
Median debt-service coverage ratio: 
LC 1: 1.24; 
LC 2: 1.27; 
LC 3: 1.17; 
Median LTV ratio: 
LC 1: 80%; 
LC 2: 51%; 
LC 3: N/A. 

Origination year: 2006; 
Median debt-service coverage ratio: 
LC 1: 1.22; 
LC 2: 1.23; 
LC 3: 1.14; 
Median LTV ratio: 
LC 1: 70%; 
LC 2: 59%; 
LC 3: N/A. 

Origination year: 2007; 
Median debt-service coverage ratio: 
LC 1: 1.21; 
LC 2: 1.17; 
LC 3: 1.13; 
Median LTV ratio: 
LC 1: 71%; 
LC 2: 38%; 
LC 3: N/A. 

Origination year: 2008; 
Median debt-service coverage ratio: 
LC 1: 1.23; 
LC 2: 1.28; 
LC 3: 1.13; 
Median LTV ratio: 
LC 1: 75%; 
LC 2: 56%; 
LC 3: N/A. 

Origination year: 2009; 
Median debt-service coverage ratio: 
LC 1: 1.24; 
LC 2: 1.31; 
LC 3: 1.15; 
Median LTV ratio: 
LC 1: 76%; 
LC 2: 47%; 
LC 3: N/A. 

Origination year: 2010; 
Median debt-service coverage ratio: 
LC 1: 1.27; 
LC 2: 1.25; 
LC 3: 1.18; 
Median LTV ratio: 
LC 1: 72%; 
LC 2: 35%; 
LC 3: N/A. 

Origination year: 2011; 
Median debt-service coverage ratio: 
LC 1: 1.31; 
LC 2: 1.49; 
LC 3: 1.20; 
Median LTV ratio: 
LC 1: 70%; 
LC 2: 46%; 
LC 3: N/A. 

Sources: Selected loan consortiums. 

N/A = data not available. 

[End of table] 

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. 

Table 25: Percentage of Selected Housing Finance Agencies' Unpaid 
Principal Balances That Were Seriously Delinquent as of December 2011, 
2005-2011: 

Origination year: 2005; 
60 days or more delinquent: 
HFA 1: 0.00%; 
HFA 2: 0.00%; 
HFA 3: 0.00%; 
HFA 4: 0.00%; 
HFA 5: 5.6%; 
HFA 6: 0.00%. 

Origination year: 2006; 
60 days or more delinquent: 
HFA 1: 0.00; 
HFA 2: 0.00; 
HFA 3: 0.00; 
HFA 4: 0.00; 
HFA 5: 7.1%; 
HFA 6: 0.00%. 

Origination year: 2007; 
60 days or more delinquent: 
HFA 1: 0.00; 
HFA 2: 0.00; 
HFA 3: 0.00; 
HFA 4: 0.00; 
HFA 5: 0.0%; 
HFA 6: 0.00%. 

Origination year: 2008; 
60 days or more delinquent: 
HFA 1: 0.00; 
HFA 2: 0.00; 
HFA 3: 0.00; 
HFA 4: 0.00; 
HFA 5: 0.0%; 
HFA 6: 0.00%. 

Origination year: 2009; 
60 days or more delinquent: 
HFA 1: 0.00; 
HFA 2: 0.00; 
HFA 3: 0.00; 
HFA 4: 0.00; 
HFA 5: 0.0%; 
HFA 6: 0.00%. 

Origination year: 2010; 
60 days or more delinquent: 
HFA 1: 0.00; 
HFA 2: 0.00; 
HFA 3: 0.00; 
HFA 4: 0.00; 
HFA 5: N/A; 
HFA 6: 0.00%. 

Origination year: 2011; 
60 days or more delinquent: 
HFA 1: 0.00; 
HFA 2: 0.00; 
HFA 3: 0.00; 
HFA 4: 0.00; 
HFA 5: 0.0%; 
HFA 6: 0.00%. 

Sources: Selected housing finance agencies. 

N/A = data not available. 

[End of table] 

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 : 2005; 
60 days or more delinquent: 
LC 1: 7.63%; 
LC 2: 0.00%; 
LC 3: 0.00%. 

Origination year : 2006; 
60 days or more delinquent: 
LC 1: 0.87; 
LC 2: 0.00; 
LC 3: 0.00%. 

Origination year : 2007; 
60 days or more delinquent: 
LC 1: 0.00; 
LC 2: 0.00; 
LC 3: 0.00%. 

Origination year : 2008; 
60 days or more delinquent: 
LC 1: 0.00; 
LC 2: 0.00; 
LC 3: 0.00%. 

Origination year : 2009; 
60 days or more delinquent: 
LC 1: 0.00; 
LC 2: 0.00; 
LC 3: 0.00. 

Origination year : 2010; 
60 days or more delinquent: 
LC 1: 0.00; 
LC 2: 0.00; 
LC 3: 0.00%. 

Origination year : 2011; 
60 days or more delinquent: 
LC 1: 0.00; 
LC 2: 0.00; 
LC 3: 0.00%. 

Sources: Selected loan consortiums. 

[End of table] 

[End of section] 

Appendix VI: GAO Contact and Staff Acknowledgments: 

GAO Contact: 

William B. Shear, (202) 512-8678 or shearw@gao.gov: 

Staff Acknowledgments: 

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. 

[End of section] 

Footnotes: 

[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 government-sponsored enterprise, 
the Federal Home Loan Bank System. 

[2] Congress initially chartered Fannie Mae in 1938 but did not 
establish it as a shareholder-owned 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 shareholder-
owned corporation in 1989. 

[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. 

[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 low-income areas (known as the special affordable housing 
goal). 

[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. 

[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. 

[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. 

[10] See Lawrence Goldberg and Charles A. Capone, Jr., "Multifamily 
Mortgage Credit Risk: Lessons from Recent History," Cityscape, 4, no. 
1 (1998). 

[11] The data on multifamily net charge-offs came from a Fannie Mae 
report prepared prior to its 2004 restatement of earnings. 

[12] The data on multifamily net charge-offs came from a Freddie Mac 
report prepared prior to its 2003 restatement of earnings. 

[13] In 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, [hyperlink, 
http://www.gao.gov/products/GAO/RCED-92-6] (Washington, D.C.: Oct. 7, 
1991). 

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

[15] According 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. 

[16] Under 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. 

[17] FHFA, 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 single-and multifamily mortgages. 

[18] Unpaid principal balance is the remaining outstanding balance on 
loans acquired and is a key metric the multifamily industry uses to 
measure portfolio activity. 

[19] The 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. 

[20] Freddie Mac piloted K-deals in 2006. 

[21] Specifically, 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. 

[22] The 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. 

[23] 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. 

[24] According 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. 

[25] Fannie Mae's multifamily transactions involving multiple loans 
and multiple properties may be characterized by cross-collateralized 
and cross-defaulted loans. Cross-collateralization 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. 

[26] Fannie 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. 

[27] As 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. 

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

[29] For 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. 

[30] LIHTC 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. 

[31] Fannie 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. 

[32] Ninety-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. 

[33] Trepp is a provider of CMBS analytics, data, consulting, and 
software to the securities and investment management industry. 

[34] To a lesser extent, the literature also noted that Fannie Mae and 
Freddie Mac have helped set underwriting standards in the multifamily 
market. 

[35] See 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). 

[36] Joint Center for Housing Studies, Harvard University, Meeting 
Multifamily Housing Finance Needs During and After the Credit Crisis 
(2009). 

[37] 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). 

[38] 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). 

[39] While 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. 

[40] Low-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. 

[41] Tom White and Charlie Wilkins, No Federal Guaranty for 
Multifamily and Other Ideas for Multifamily Housing Finance Reform, 
paper presented at an American Enterprise Institute-hosted event 
entitled "A New Lease on Loans: Ideas for Multifamily Housing Reform" 
(Washington, D.C.: Nov. 16, 2011). 

[42] 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). 

[43] According 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. 

[44] Federal Housing Enterprises Financial Safety and Soundness Act of 
1992, Pub. L. No. 102-550, §§ 1331-1334. 

[45] A 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. 

[46] According 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 Government-Sponsored Enterprises" (St. 
Louis, Mo.: Nov. 17, 2010). 

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

[48] See Section 1333(a)(4) of the Safety and Soundness Act, as 
amended by HERA (12 U.S.C. 4563(a)(4)). 

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

[50] The new affordable housing goals include four single-family goals 
and one single-family subgoal as well as one multifamily goal and one 
multifamily subgoal. 

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

[52] See 77 Fed. Reg. 34263 (June 11, 2012) (proposed rule). 

[53] See 12 U.S.C. §§ 4544, 4566. 

[54] See 12 C.F.R. §§ 1282.62 and 1282.63. 

[55] See 12 U.S.C. § 4566. 

[56] See, 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. 

[57] According 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. 

[58] To determine the enterprises' total business and multifamily 
business, we considered purchases of mortgages and mortgage-related 
securities (MBS and mortgage revenue bonds). 

[59] These programs are in addition to the enterprises' sharing of 
risk with lenders and investors, as discussed previously in the 
background section of this report. 

[60] We 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). 

[61] Aggregate data on the credit standards of banks and thrifts and 
FHA and RHS lenders are not readily available. 

[62] The 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. 

[63] One of the HFAs in our sample did not provide data on debt-
service coverage ratios. 

[64] The third loan consortium in our sample did not provide data on 
median LTV ratios. 

[65] According 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. 

[66] Loans 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. 

[67] According 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. 

[68] Affordable 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. 

[69] According 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. 

[70] If the term of the loan is 10-15 years and there is no 
amortization reserve, the risk-sharing premium is 50 basis points (.50 
percent). 

[71] According 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. 

[72] These 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. 

[73] These annual reports are required by Section 1319B of the Safety 
and Soundness Act, as amended (12 U.S.C. § 4521). 

[74] The 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. 

[75] We 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. 

[76] The 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 debt-service coverage ratios, 
high LTV ratios, and loans that have gone delinquent. 

[77] Unpaid principal balance is the remaining outstanding balance on 
loans acquired and is a key metric the multifamily industry uses to 
measure portfolio activity. 

[78] 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. 

[79] 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. 

[80] 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 tax-exempt and taxable securities. K-deals 
are securities that are generally backed by pools of newly purchased 
mortgages underwritten by Freddie Mac. 

[81] 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. 

[82] 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. 

[83] 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. 

[84] 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. 

[85] 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. 

[86] The number of loans with missing values generally represented 
less than 5 percent of each enterprise's unpaid principal balance. 

[87] When 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. 

[88] The number of loans with missing values generally represented 
less than 5 percent of each enterprise's unpaid principal balance. 

[89] Fannie 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. 

[90] Aggregate 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. 

[91] We 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. 

[92] Board 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). 

[93] Trepp is a provider of CMBS analytics, data, consulting, and 
software to the securities and investment management industry. 

[94] See 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 
Institute-hosted event entitled "A New Lease on Loans: Ideas for 
Multifamily Housing Reform" (Washington, D.C.: Nov. 16, 2011). 

[95] See, 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). 

[96] See, 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. 

[97] According 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. 

[98] One HFA was unable to provide us with median debt-service 
coverage ratios. 

[99] These were the only three consortiums that responded to our 
request for data. 

[100] One loan consortium was unable to provide us with data on median 
LTV ratios, median loan sizes, and median number of units per property. 

[101] The Federal Housing Administration was not able to provide data 
on average or median loan and property size. 

[102] RHS was only able to provide us with average loan size. 

[End of section] 

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