The multi-family side of the GSEs has proven over two decades that it can effectively and profitably execute and close billions of dollars of multi-family rental housing loans. Through that activity, it has stabilized apartment values by providing capital to a broad spectrum of rental housing. One third of American households rent. Those properties are owned by pension funds, REITs and tens of thousands of small business and family partnerships of every form, in every community in this country. A critical component of every apartment investment is consistently available fixed-rate mortgages.

 The GSEs have continued to perform profitably the core business of providing long-term fixed-rate mortgage capital to the apartment market, through recessions and the single-family boom and bust.

News Flash Number One: To those that are responsible for deciding the future of the GSEs, it wasn’t the corporate structure that created this excellent, well-operated business line within Freddie Mac and Fannie Mae, it was the people who were there every day, operating this business and making underwriting decisions. And not only were they making solid decisions but executing them in a timely manner that resulted in transactions being closed in 60 to 90 days as a normal course of business.

The exceptional people that have managed that business have never received the credit due to them.  Unfortunately, through the inaction and missteps–and in some cases careless negligence–of regulators and politicians, the multi-family businesses of the GSEs are on a path that, if not corrected soon, will lead to their effective demise. Key employees at both Freddie and Fannie continue to resign as they reach the limit of their patience. This talent drain will result in the GSEs’ inability to operate to the high standards they have historically adhered.

Both firms have lost regional managers, credit officers, production managers and most recently the head of Freddie Mac Multi-family, Mike May. It’s not too late to stop this loss of talent. The responsibility falls on regulators and politicians to take action now. Certainty of employment is an absolute necessity. Good people want to know where their company is headed; they want to be associated with success and receive the recognition and compensation that is fairly due to them. Not only have they not received the recognition due to them, they have been broadly painted with the failures of the single-family business.

News Flash Number Two: There is no foolproof structure. It’s all about good people. People that are self-absorbed with their own personal greed and agenda for power and money will game any system for their own benefit. Those people are not interested in the long-term success of the enterprise; they are only interested in themselves. That perspective is unfortunately common in many poorly run businesses. Said another way, it’s always about the people! Good people that have the right values will make any enterprise with a fundamentally sound concept successful.

 Have you ever wondered why Freddie Mac and Fannie Mae have less than a 1 percent multi-family rental delinquency rate and the commercial mortgage-backed securities market has a 15.7 percent delinquency rate on the same property type? It’s about people making the right long-term decisions– consistently.

It’s not too late to fix this. There are still enough good people at both firms to operate as successfully as they have in the past, and given the opportunity, they are capable of supplementing their bench talent with the right type of additional new hires. But the talent pool is shrinking fast as GSE employees continue to resign, and both firms are at a major disadvantage in hiring key people.

The time to act is now; doing nothing will effectively result in the demise of these critical businesses. The potential financial impact to rental housing and the economy cannot be understated. The private sector does not have the capacity to replace the $324 billion portfolio of fixed-rate mortgage capital for multi-family rental properties held or sponsored by the GSEs and related agencies. Segregate the GSE multi-family business from single-family and put in place the assurances and guidance necessary for this business to survive before it’s too late.

Eduardo “Ed” Padilla is CEO of NorthMarq Capital.

(For more on the GSEs, click here for Shekar Narasimhan’s views.)