Bibby’s primary concern seems to be whether the agencies will move more toward securitizing loans instead of buying portfolios. “If you read the information in the rescue plan, you can see a strong emphasis toward securitizing options and a de-emphasis on portfolio holdings,” he says. “The problem we have in the multifamily business [is that] portfolio deals are the preferred execution.”
With the presidential and congressional elections roughly two months away, no one wants to make a wager on what Fannie and Freddie will ultimately look like. Treasury Secretary Henry M. Paulson Jr., who will be stepping down in January, has already said that the ultimate fate of these agencies will be left up to someone else. “This is going to be thrown back to Congress and the new administration to deal with,” Bibby says.
One scenario floating around Capitol Hill is that the two entries could be treated like the public utilities, where there’s a cap on the returns they can make. They could also be privatized or split up.
“They need to be honest about what the mission is,” says Dan Fasulo, managing director for Real Capital Analytics, a New York-based firm that tracks real estate transactions. “You can be public, or you can be private, but you can’t be middle of the road. You will be squashed if you’re middle of the road.”
But considering where things stand right now ? especially with the wipeout of Fannie and Freddie’s stock prices ? Fasulo thinks the government made the right move. “It was something that had to be done,” he says. “It’s unfortunate that Congress let those entities get as large as they did.”
Bibby hopes the government won’t turn Fannie and Freddie into an organization like Ginnie Mae, a much smaller government-owned agency and issuer of mortgage-backed securities. “I was hoping if Treasury did something, it would do something like this ? it would not try to take them over and run them as government entities,” Bibby says. “I’m relieved that they’ve taken the approach that tries to keep them going as private entities and hopefully will return them to profitability.”
But what eventually happens is anyone’s guess. “All indications are that it’s business as usual, but that could change,” Fitch says. “It’s day-by-day.”
