Fannie Mae’s Construction Lending Updates Signal Strategic Progress for Lenders and Borrowers
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By John McMullen, AMP, Senior Policy Specialist, Residential Policy, MBA
John McMullen, AMP, is the senior policy specialist of Residential Policy at MBA. In his role, he advances MBA’s loan production policy initiatives across key housing sectors–including condominium, construction, and manufactured housing finance–to expand housing affordability, improve market access and liquidity for lenders.
On Nov. 5, Fannie Mae announced long-awaited enhancements to its construction-to-permanent (C2P) loan policies, marking a significant win for lenders, borrowers and the broader housing market. Championed by the Mortgage Bankers Association, Fannie Mae’s decision to extend the maximum age of credit documents from 12 to 18 months addresses one of the most persistent operational pain points in construction lending for participants, helping to restore predictability to the market.
Why These Changes Matter for Borrowers and Lenders
This announcement now aligns Fannie Mae’s policy with market realities. The existing GSE framework is designed for shorter build times, which creates pipeline, liquidity and fallout risk for lenders; yet the construction market is more complex than it was in previous years. Lenders must navigate unpredictable market conditions, manage project timeframes and adapt to changing borrower profiles. In an environment marked by supply constraints and project delays due to utility backups or stalled inspections, the traditional 12-month credit window has become increasingly impractical for borrowers, deterring lender participation.
Some members have reported an average 13-month timeline for completing a home today. Extending beyond the existing policy timeline, these project delays are rarely within the lenders’ or borrowers’ control and have a cascading effect on borrower eligibility. When local governments pause all permitting activity for months following a natural disaster, lenders are required to requalify borrowers mid-project, simply because their credit reports have aged out. These scenarios not only increase operational costs but also introduce avoidable risk and uncertainty for families trying to build homes. This is especially burdensome for borrowers in affordable markets, who may lack the financial buffer to absorb delays.
By extending the credit document validity window to 18 months, Fannie Mae is helping lenders and borrowers avoid these disruptions, giving lenders certainty in loan delivery and the flexibility to manage projects often impacted by external factors. This announcement fosters long-overdue alignment between credit policy, construction reality and a more resilient path to homeownership.
Industry Leaders Applaud Progress
The lending community has welcomed the announcement as both practical and impactful.
“MBA specifically advocated for these changes, and we applaud Fannie Mae for listening to our members’ feedback,” said Pete Mills, MBA’s senior vice president of Residential Policy and Strategic Industry Engagement. “These are common-sense improvements that will help lenders better serve borrowers navigating the complexities of new home construction.”
Austin McKnight, national construction administrator at PRMI, noted: “We are extremely pleased to see these updates. The age of documentation and minimum credit score flexibility allows us to keep loans moving forward when previously we may have had to requalify borrowers mid-construction, creating unnecessary stress and risk.”
Nicole Wolfgram, VP of construction at Waterstone Mortgage, added: “These changes are beneficial to lenders already in this space by lessening some of the risk they must take on with construction lending. Ultimately, that makes homeownership more accessible by providing additional financing options. It’s a big win for us and the market.”
A Strategic Win for the Market
These updates are more than operational tweaks—they are strategic enablers. By reducing friction in the construction lending process, Fannie Mae is helping lenders expand access to new housing supply, support borrower stability, and manage risk more effectively in a tight housing market.
As MBA continues to advocate for common-sense policy enhancements, we remain focused on ensuring construction lending supports sustainable growth and operational resilience across the housing finance ecosystem.
