From the Mortgage Banker’s Association:

Multifamily rental housing is a critical part of the U.S. housing market and vital to our communities. More than 15 million (one in seven) households call multifamily rental housing — those with five or more units — their home. This broad market includes workforce rental housing, seniors housing, student housing, rental properties that primarily serve low- and moderate-income families, and market rate rental housing. And importantly, multifamily rental housing provides affordable housing, with 93 percent of multifamily rental apartments having rents affordable to households earning area median incomes or less.
While policy discussions are frequently driven by issues facing the single-family mortgage market, ensuring a vibrant and stable multifamily finance system is equally important to the public dialogue. A thoughtful and deliberative approach to this vital source of housing is necessary as policymakers continue to examine the future government role in this market, as well as the future of the government-sponsored enterprises (GSEs), Fannie Mae and Freddie Mac. We appreciate the Federal Housing Finance Agency’s (FHFA) recognition in its February 2012 strategic plan of several unique characteristics of the GSEs’ multifamily business lines.1 The Obama Administration’s 2011 white paper on reforming the housing finance system, too, called for a “renewed commitment to affordable rental housing.”2 Policymakers in Congress as well have focused increasing attention on the importance and distinct characteristics of the multifamily housing market.
The conversation on the future state of the GSEs must fundamentally address the unique landscape of the multifamily finance market. The importance of the multifamily finance market to our Nation’s housing system, the substantial private capital already deployed in multifamily debt from a range of capital sources (including banks, life insurance companies, investors in CMBS, and through GSE risk sharing structures / arrangements), the overall strong performance of multifamily mortgages during the recent credit crisis (the serious-delinquency rate of each GSE and of life insurance companies was under three-tenths of one percent as of the second quarter of 2012), and the counter-cyclical role of the government guarantee (through the GSEs and the Federal Housing Administration) during the recent downturn — all describe the state of the multifamily finance market.
The current state of the GSEs in government conservatorship is both unique and unsustainable in the long-term. While the GSEs historically benefited from an “implicit” federal government guarantee, since entering into conservatorship in 2008, they receive explicit government support through a funding agreement between the U.S. Treasury and FHFA as the GSEs’ conservator. We do not believe that it is in the long-term interests of the housing finance system or American taxpayers for the status quo to continue indefinitely without policy resolution. At the same time, the policy development process should guard against causing harm to the multifamily market or disadvantaging multifamily rental housing relative to owner-occupied housing, as both are integral to our communities and a vibrant U.S. economy.
To assist policymakers in these deliberations, the Mortgage Bankers Association convened a Task Force in 2012 comprised of industry experts from its broad commercial / multifamily finance membership to focus on the future of the GSEs’ role in the multifamily market. Building on the groundbreaking 2009 Report by MBA’s Council on Ensuring Mortgage Liquidity,3 the MBA Task Force has developed recommendations on the future of multifamily housing finance and the role of the GSEs.
The core recommendations of the MBA GSE Multifamily Task Force are as follows:
First, our nation’s housing policies should reflect the importance of multifamily rental housing, the range of capital sources that support this market, and the need for liquidity and stability in all market cycles. Fifteen million households rent homes in multifamily properties, and the number is expected to grow. A broad range of capital sources support the multifamily finance market, including private capital sources. The roles of the GSEs and FHA in financing multifamily mortgages have been substantial, but other market participants — including life insurance companies, banks and other lenders — have maintained a strong presence as well. With respect to the GSEs’ multifamily activities, credit performance has been strong during the recent market downturn and, with government support, the GSEs have served a countercyclical role that provided liquidity when private capital sources largely exited the market.
Second, private capital should be the primary source of financing for multifamily housing with a limited, government-backed insurance program ensuring that the market has access to liquidity in all cycles. The FDIC-like risk insurance program would provide support at the mortgage-backed security, rather than at the entity, level. The role of private capital is vital in two respects: The deployment of private capital through market participants that have historically supported multifamily finance, such as portfolio lenders and CMBS investors, and the investment of private capital in entities that would be permitted to issue government-backed securities.
We believe that a focused role for the federal government through a government-backed risk insurance fund, with a federal catastrophic backstop, would ensure continuous liquidity and stability in all market cycles. Eligible mortgage-backed securities would have a Ginnie Mae-like wrap. The insurance fund, paid for through risk-based premiums, could be modeled after FDIC programs and would support such mortgage-backed securities, not at the level of the issuer, as is the case today.
This role would be similar to that of the U.S. government in a number of sectors and markets —federal deposit insurance in the banking system, terrorism risk insurance that backstops property and casualty risk, and federal pension insurance for private defined benefit plans are a few examples.
Third, entities eligible to issue government-backed securities should be mono-line, funded by private capital, focused on securitization, serve the workforce rental market, and regulated in a manner that protects taxpayers and ensures robust competition among capital sources. A strong government regulator with market expertise would provide oversight regarding the issuing entities, including their safety and soundness, risk-based capital requirements, and products offered. The entities, which would not be limited to potential successor entities to the GSEs, also would assume a significant risk position by providing an entity-level buffer, placing private capital at risk ahead of any government backstop. Risk-based premiums would be deposited into a federal insurance fund, to be drawn upon only if and when the entity becomes insolvent. The pricing of the premiums would be structured in a manner that allows robust competition. Importantly, the issuing entities would need to attract private capital and maintain financial viability. We believe, however, that they should be mono-line institutions limited to secondary mortgage market activities and the housing finance sector, with a focus on workforce and affordable rental housing.
Fourth, stewardship of existing GSE assets and resources on behalf of taxpayers should be a core consideration for any policymaker action — during the current period of conservatorship, any transition period, and in the future state of multifamily finance. The talent and expertise at the GSEs, their existing books of business, their market executions and any profits generated by their multifamily businesses are valuable to U.S. taxpayers and should be deployed in a manner that support the future state of multifamily housing finance. Preserving and dedicating such resources would support an orderly transition — over a five to ten year period — to a new mortgage finance system and optimize potential returns to taxpayers.
Finally, the long-term liquidity and stability of the multifamily finance system in all market cycles, rather than whether the existing multifamily business lines could survive as ongoing businesses, should be the core driver of whether the GSEs’ multifamily businesses should operate on a standalone basis. We strongly believe that whether the GSEs’ multifamily businesses should operate on a standalone basis should not be determined in a vacuum nor based solely on the financial viability of multifamily standalone enterprises without government guarantees. The primary drivers of this determination should be whether a standalone scenario would reflect the importance of multifamily rental housing and the need for liquidity and stability in all market cycles.
Fundamentally, the do no harm principle should govern, particularly in light of the stability and successes of the multifamily market overall. Taxpayers and the system should also be protected, and the government must exercise stewardship, including with regard to the preservation of existing resources valuable to the U.S. government.

Read full report here: http://mba.informz.net/MBA/data/images/whitepapergsemf120412.pdf