FHFA Shrinks Fannie Mae, Freddie Mac Multifamily Lending Caps

Fannie Mae and Freddie Mac multifamily lending caps will shrink slightly in 2018, the Federal Housing Finance Agency announced yesterday.

Each enterprise will be subject to a $35 billion cap on multifamily purchase volume next year, down from 2017’s $36.5 billion limit.

FHFA based the caps on projections for the overall size of next year’s multifamily finance market, which the agency said it expects will be slightly smaller than this year.

FHFA noted it will share more details soon. “While the 2018 Scorecard will provide more information on the role that FHFA expects the enterprises to play in the multifamily market, FHFA announced the caps today to maintain continuity in the multifamily market and to provide all stakeholders adequate time to plan for their 2018 business,” the agency said. “As in prior years, FHFA will review its estimates of the multifamily loan origination market size on a quarterly basis and adjust the caps if necessary.”

But FHFA said it will not reduce the caps even if it determines the actual size of the 2018 market is smaller than initially projected “to prevent disruption in the market.”

The multifamily lending caps further FHFA’s strategic goal that the enterprises provide multifamily market liquidity without impeding private capital from participating in the market.

FHFA said it will continue to exclude certain loans in the affordable and underserved market segments from the 2018 caps because market support for affordable housing has been historically weak. Lending excluded from the cap include loans to finance energy- or water-efficiency improvements and loans on affordable units in extremely high-cost markets.

To qualify for exclusion from the cap based on energy- or water-efficiency improvements, FHFA will require multifamily loans that finance efficiency improvements through Fannie Mae’s Green Rewards and Freddie Mac’s Green Up/Green Up Plus programs to provide a 25 percent energy or water savings. “FHFA is making this adjustment to establish a clear policy priority that improvements must substantively increase energy and water savings for borrowers and/or tenants,” the agency said.

To qualify for the affordable property exclusion, units affordable to renters earning less than 120 percent of the area median income in extremely high cost markets will be eligible for exclusion from the cap on a pro-rata basis, FHFA said.