This could give a boost to retail development if this action were to pass.
- Erik
A Fannie Mae for retail centers?
A federally chartered, privately funded loan guarantee program could help turn capital spigots back on for retail real estate, observers speculate. Such a program could mimic the apartment-financing program Fannie Mae ran successfully for 20 years.
"Whatever its shortcomings in the single-family mortgage business, Fannie Mae has developed a highly effective program," wrote George Gellman, chairman of The Benchmark Group of Cos., in a white paper for ICSC.
Fannie Mae works like this: A developer goes to a Fannie Mae-designated underwriter, usually a bank, which then recommends an appropriate mortgage to Fannie Mae. Fannie Mae guarantees that mortgage for an annual insurance premium the developer pays. The underwriter agrees to guarantee a portion of the loan and receives its own commensurate insurance premium from the developer.
"From an applied economics perspective, everyone's interest is aligned," Gellman wrote. "Once the mortgage has a government guarantee, it can be easily sold to insurance companies, pension funds or Wall Street." New legislation, Gellman speculates, would direct a government agency, most likely the FDIC, to launch the program.
Comments(1)