This report concentrates on multifamily and commercial mortgages. It examines policy concerns over the future of multifamily finance and commercial and multifamily mortgage losses in the aftermath of the December 2007-June 2009 recession. Current Concerns and Legislation

As financial markets continue to recover from the December 2007-June 2009 recession, congressional interest has turned from concerns about the impact of losses in multifamily and commercial mortgages on financial stability to reforming the single-family and multifamily mortgage markets. One key issue under debate is the question of what the federal government's role should be in residential mortgage markets, including multifamily housing. Bills in both the House and Senate would wind down Fannie Mae and Freddie Mac, two congressionally chartered government-sponsored enterprises (GSEs), which were created to support the market for single-family and multifamily mortgages. By law, Fannie Mae and Freddie Mac are limited to purchasing existing single-family and multifamily mortgages that others have originated. In the House, H.R. 2767 , the Protecting American Taxpayers and Homeowners (PATH) Act of 2013, proposes to wind down Fannie Mae and Freddie Mac over a period of years. The bill makes no mention of the GSEs' multifamily lending. In the Senate, S. 1217 , the Housing Finance Reform and Taxpayer Protection Act of 2013 (Corker-Warner), proposes to wind down Fannie Mae and Freddie Mac and to replace the Federal Housing Finance Agency (FHFA) with a new entity to be called the Federal Mortgage Insurance Corporation (FMIC). These MBS would have an explicit full-faith-and-credit federal government guarantee, and the FMIC would regulate aspects of the mortgage market related to these MBS. The risk to the government from all mortgages has decreased as the economy has recovered. The government has provided explicit full faith and credit guarantees to the FDIC, FHA, and others. The federal government has implicitly backed Fannie Mae's and Freddie Mac's guarantees to purchasers of MBS. Treasury has invested more than $187 billion in the two GSEs to keep them solvent. The largest holder of commercial mortgages and multifamily mortgages, providing 54.7% of commercial mortgages and 30.0% of multifamily mortgages, is U.S.-chartered depositories, which experienced severe financial distress during the recession.
As the recovery from the recession of December 2007-June 2009 continues, congressional interest in multifamily and commercial mortgages has shifted from worries about the immediate impact of foreclosures to consideration of the future of mortgage finance. During the recession, losses on mortgages raised concerns about the risk to tax payers through Federal Deposit Insurance Corporation (FDIC) insurance, which is backed by the full faith and credit of the federal government. Significant parts of these losses occurred due to commercial loans at smaller insured depositories. The federal government has invested more than $187 billion in Fannie Mae and Freddie Mac, which guarantee single-family and multifamily mortgages. Although Fannie Mae and Freddie Mac do not have explicit full faith and credit backing from the federal government, they do have a legal agreement that would provide additional government funds, if needed.
Congressional interest in mortgage reform, including multifamily mortgages, is reflected in several bills that have been introduced. In the House, only H.R. 2767, the Protecting American Taxpayers and Homeowners Act of 2013 (PATH Act), has been ordered to be reported by the Financial Services Committee. In the Senate, hearings have been held on S. 1217, commonly referred to as the Corker-Warner bill. Both would wind down Fannie Mae and Freddie Mac, which have been key sources of multifamily finance. (Fannie Mae and Freddie Mac are prohibited by their congressional charters from activities not directly related to single-family and multifamily mortgages and have not been involved in commercial lending.) The PATH Act makes no mention of multifamily housing finance. Corker-Warner would create a new entity, the Federal Mortgage Insurance Corporation (FMIC), which would take over Fannie Mae's and Freddie Mac's role in multifamily finance.
The PATH Act would greatly reduce the government's role in the mortgage system whereas the Corker-Warner bill would reshape the government's role.
This report is an overview of multifamily and commercial mortgage issues that may be of interest to Congress. It compares multifamily and commercial mortgages to the more familiar single-family mortgages. For an analysis of legislation, see CRS Report R43219, Selected Legislative Proposals to Reform the Housing Finance System, by [author name scrubbed], [author name scrubbed], and [author name scrubbed].