Old CoupleIn recent weeks the Obama administration has released options for reducing the government’s involvement in the Government Sponsored Entities Fannie Mae and Freddie Mac.

On the surface, this makes sense. Fannie and Freddie have served as clearing houses for many of the country’s troubled mortgages and to date, bailing them out has cost taxpayers nearly $150 billion.

But guess what?

Fannie and Freddie’s funeral could also be that of the multifamily housing market.

Huh?

Let’s put it this way. They’re kind of like your rich old aunt and uncle, who will give you a loan when no one else will.

In fact, last year the two agencies were responsible for $32 billion in loans to multifamily investors. That’s more than 60 percent of all the multifamily loans made last year. That figure was even higher in 2009, when they were responsible for 80 percent of rental property debt.

You see, when all of the capital makets (the folks who buy up mortgages) bailed on the real estate sector, Fannie and Freddie did not. And their faith in the multifamily housing market has been rewarded.

According to Fannie Mae data, just .80 percent of the loans in their multifamily division were 60 days or more delinquent. Compare that with 13 percent of the apartment loans backed by commercial mortgage backed securities, and the four percent of bank loans that are 90 days or more late.

In other words, when it comes to their multifamily, Fannie Mae and Freddie Mac loans are out-performing the rest of the market. This in turn has attracted investors in their product, which kept the money flowing in to the rental market, which then resulted in lenders being able to offer long term, fixed rate loans to duplex and investment property buyers.

What would happen to our ability to buy duplexes and investment property if Fannie and Freddie died suddenly?

I suspect it might feel a little like being left out of their will.