FHFA Increases Fannie Mae, Freddie Mac Multifamily Caps

The Federal Housing Finance Agency on Friday revised its cap structure on Fannie Mae and Freddie Mac’s multifamily businesses.

FHFA changes Fannie Mae and Freddie Mac’s multifamily loan purchase caps annually based on the agency’s projected size of the following year’s multifamily finance market. The agency capped each enterprise’s multifamily purchase volume limit at $35 billion in 2018 and 2019. Starting October 1 the new limits will increase to $100 billion for each enterprise for the five quarters between fourth quarter 2019 and year-end 2020.

In a change from past practice, FHFA noted the new caps will apply to all multifamily business with no exclusions. In the past the agency excluded certain loans including loans to finance energy or water efficiency improvements from the caps.

“Multifamily housing is a critical component of addressing our nation’s shortage of affordable housing,” said FHFA Director Mark Calabria. “These new multifamily caps eliminate loopholes, provide ample support for the market without crowding out private capital and significantly increase affordable housing support over previous levels.”

Calabria said the enterprises should be able to provide “consistent, stable liquidity to the market” through the five-quarter period under the newly raised caps.

At the same time, FHFA directed that at least 37.5 percent of each enterprise’s multifamily business should be “mission-driven, affordable housing,” saying the new, higher minimum threshold ensures the enterprises’ multifamily businesses maintain their commitment to affordable housing finance.

“While we continue to analyze the market impact of FHFA’s guidance, we welcome the simplified framework and continued liquidity to the market,” said Mortgage Bankers Association President and CEO Bob Broeksmit, CMB. “We also appreciate FHFA’s recognition of the varied capital sources that finance multifamily rental housing and the emphasis on affordable housing as part of the new purchase cap regime.”

FHFA said Fannie Mae and Freddie Mac loans that finance energy and water efficiency improvements will now be considered conventional business and subject to the $100 billion cap unless they meet other mission-driven affordability requirements.

FHFA called the cap levels appropriate given current market forecasts. “However, FHFA will routinely review its estimates of market size (and may change the limits going forward),” it said.