Fannie Mae/Freddie Mac

yayaa's picture
Rank: Senior Gorilla | 813

Besides your typical google search that doesn't get into the weeds about multi-family lending and their role in the marketplace, what exactly is Freddie and Fannie? Do they purchase loans from the DUS listed banks and then securitize them via MBS? Do they make money on servicing and securitization?

Does anyone with experience understand what it means when you read about "Freddie Mad provided a 65m dollar loan for an apartment complex?" Thanks.

The more specific detail the better. Just wondering why your firm went the agency route.

Comments (6)

Dec 3, 2019

For a historical perspective on Fannie/Freddie jump to minute 48:00 in the below video:

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Dec 3, 2019

Fannie and Freddie provide liquidity to the housing markets. Plain and simple. On the commercial side, their purpose is to promote affordable housing. Lots of people who don't understand the economy see this as a problem because they really provide capital to assist with the exchange of investment properties, and in theory help to make investors more wealthy, but they target affordable properties and actually help to keep those properties affordable through numerous programs and so on. Fannie purchases loans from their DUS lenders and Freddie gets them originated through their Optigo partners. Dus lenders have warehouse lines to provide the initial funding, and trade the note with investors to lock spread/interest rate. Freddie locks the spread in their quote process and locks the interest rate on its own. Freddie makes money servicing and securitizing I believe, and Im pretty sure Fannie only makes money securitizing. Their securitization models are very different however, and I am not as familiar with that side of the business. That all said, when you read the agencies provided a loan for an apartment, its originated through one of their lenders and ultimately funded by the agencies. The lenders retain the servicing, and typically if they have in house originators, split the loan fee as well. Very profitable model for the lenders and B piece buyers, all in all.

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Dec 3, 2019

Thanks! A lot of thorough information you gave that I need to digest...

Dec 3, 2019

Apologies for "vomiting" it up in that form, but just glanced at WSO in between valuations and thought I'd give my 2-cents. Happy to talk through any other specifics, just PM me.

Dec 3, 2019

Thanks dude. Sounds good

Dec 5, 2019
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