Authors: Kerry D. Vandell
Fannie Mae Foundation
This article examines the efficiency of multifamily finance in supplying capital to all segments of the multifamily rental market. Four issues of importance are identified: data availability, the efficiency of the small loan market, multifamily prepayment and default risk, and the potential role of the mortgage real estate investment trusts in multifamily finance. The findings suggest that information inadequacies in multifamily finance create possible failures in the operation of the multifamily market, providing a rationale for government involvement. Government encouraged and supported data provision is necessary to understand, monitor, and guide the flow of multifamily credit so the multifamily market can fulfill its role of primary housing supplier for lowerincome households. Four omissions from the current policy discussion also are identified: understanding of the capital expenditures (repositioning) loan market, consideration of equity as well as debt financing, the special nature of the low-end market, and explicit evaluation of the benefits versus the costs from securitization and governmental intervention in the allocation of multifamily credit.
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