The alarm and concern raised by the agency’s plans come as no surprise as the two GSEs provide about half of all U.S. multifamily mortgage origination volume. Even after being taken over by the government back in 2008, when the financial crisis peaked and they started lending more conservatively, Fannie Mae and Freddie Mac have been huge in the countries financial recovery.

Edward DeMarco, the acting director of the FHFA, said that he is committed to the administration's goal of cutting back on the two GSEs multifamily mortgage volume in order to build a new system designed to help private capital replace taxpayer subsidies in a new system which will create a healthier mortgage market for both single- and multifamily housing.

After DeMarco refused to allow the GSEs to approve mortgage modifications to help struggling homeowners, nine state attorneys general signed a letter asking Congress and the White House to fire DeMarco but the agency argued that doing so would cause more harm than good.

According to DeMarco, the multifamily market’s dependence on the two GSEs, who already share credit risk with loan originators and securities investors, has decreased to a more normal range allowing for a forward push with the contract goal.

The goal is to have a 10% reduction in multifamily business new acquisitions from 2012 levels. DeMarco hopes to achieve success with a combination of increased pricing, limited product offerings and stricter overall underwriting standards. However, the main concern is the private capital markets are not ready or even willing to take over lending from the GSEs. The GSEs have underwriting policies and discipline that have led to a default rate of just 25% while private-market sources have a default rate of 15%.

Given the Mortgage Bankers Association’s prediction of $1.4 trillion worth of single-family originations this year and the GSEs current market share of 79%, the goal of reducing their influence over the mortgage market seems more modest. They emphasize the struggle the agency has to reduce GSE power without upsetting the recovery of the housing market. The goals should start to work the more the housing market recovery gains steam.