October 14, 2014 -- Small loans have always been an integral part of Fannie Mae's multifamily financing activities. Since my days as head of community lending here at Fannie Mae through today, small loans were part of our portfolio, and I learned firsthand the unique needs of small loan borrowers and the challenges that come with financing small loan properties. I also saw the impact properties financed by small loans have on increasing affordability in towns and cities across the country.

While other players have come and gone, or are just now entering the market, Fannie Mae has been financing small loans for over 15 years and has a dedicated team committed to this segment. As one of the largest established providers of liquidity to this market, we're pleased to see participation growing. The good news is that today's market has improved; banks and others are lending again, and that means more liquidity is available to fund these smaller properties.  

Financing small multifamily rental properties (defined by Fannie Mae as loans of $3 million or less nationwide and $5 million or less in high-cost markets like New York City and Los Angeles) is a critical part of the work we do to make affordable multifamily housing a reality for renters. Last year, small loans represented close to 40% of Fannie Mae's overall business by loan count and since 2009, we've provided more than $12 billion in small loans to support affordable rental housing.

Why Is Fannie Mae the Best Choice for Financing Small Multifamily Loans?
Simply put, we have the experience, expertise, and scale to deliver on these unique deals – and the commitment to keep delivering, year after year and deal after deal.

Unlike banks, which typically offer only floating-rate or hybrids, we offer both variable-rate and long-term fixed-rate loans, and we maintain relationships with our borrowers and lenders for the life of the loan. Other market participants don't offer that level of long-term relationship and service.

And, unlike other market players that concentrate their small loan business on the coasts, Fannie Mae is deeply committed to supporting these properties in smaller markets, where they have an even greater impact on overall affordability than they might in urban areas.

How the DUS Platform Supports Small Loans
We owe much of our success in the small loans market to our Delegated Underwriting and Servicing (DUS®) model, which relies on shared risk with our 24 DUS Lenders. By creating a set of underwriting standards and delegating our underwriting and servicing, we have achieved scale to be in every market, every day. Delegation, combined with our long-term, fixed-rate financing and single-asset security, provides the greatest flexibility for borrowers and lenders and enables Fannie Mae and our lender partners to continue providing liquidity, affordability, and stability to the small loan market.

"This is an important line of business for us," says Billy Posey, Chief Executive Officer, Greystone Servicing Corporation. "We've partnered with Fannie Mae for many years to do small loan lending, and we have really benefitted from their strong appetite for this product and been impressed by how quickly they securitize these loans."

An Unwavering Commitment
Our commitment to serving this crucial market is unwavering. To that end, we are continuing to increase delegations to our small loan lenders. This will speed execution and allow us to do even more to expand affordability for families in urban areas and smaller markets alike.

Creating liquidity for small multifamily loans is the kind of business we want to be in – financing profitable, credit-worthy loans that make the communities they're in better by providing safe, quality, affordable rental options for families. Doing well by doing good is a winning strategy for lenders, borrowers, and Fannie Mae.