The Estimator Allows Users To Calculate Approximately How Much Of A Deal Is Considered Affordable
Just a few weeks ago, the FHFA announced that they increased Fannie Mae and Freddie Mac's multifamily lending caps to $100 billion each (for a combined $200 billion) over the next five quarters (Q4 2019 to Q4 2020). Plus, the FHFA stated that at least 37.5% of the agencies' entire multifamily lending volume must consist of 'Mission-Driven' loans for affordable properties. This requirement means that it will likely be easier for properties with an affordability component to get agency loans. The agencies already encourage affordable property owners by offering specialized affordable loan programs with higher leverage, so this should only incentivize them more to keep properties affordable.
However, just because a deal contains an affordability component does not mean that it's a 100% affordable deal. Instead, each deal is considered to be only a certain percentage affordable, often based on the number of units with rent restrictions or other similar criteria. Fortunately for borrowers, Fannie Mae recently released its 2019 Multifamily Affordability Estimator, which allows borrowers and lenders to determine precisely how much of a deal is considered affordable. Not only does this provide valuable information for borrowers, but, in the case of many types of loans, borrowers and lenders must submit their results from the Multifamily Affordability Estimator to Fannie Mae, along with the rest of their loan application documents.
Specific Affordability Percentage Rules From Fannie Mae's 2019 Multifamily Affordability Estimator
Specifically, the 2019 Multifamily Affordability Estimator states that property affordability percentages will be qualified like so:
- Targeted Affordable Housing (TAH) or property encumbered by a regulatory agreement; such as a LURA or a Section 8 HAP contract, where 50%+ of units have a rent restriction: 100% affordable
- Targeted Affordable Housing (TAH) or property encumbered by a regulatory agreement; such as a LURA or a Section 8 HAP contract, where less than 50% of units have a rent restriction: 50% affordable
- Properties located in FHFA defined rural areas: Affordability is calculated by taking the pro-rata % of the percentage of units priced at less than or equal to 80% AMI
- Seniors housing: Affordability is calculated by taking the pro-rata % of the percentage of units priced at less than or equal to 80% AMI
- Standard Conventional Properties: Standard Cost Markets: Affordability is calculated by taking the pro-rata % of the percentage of units priced at less than or equal to 60% AMI
- Standard Conventional Properties: Cost Burdened Renter Markets: Affordability is calculated by taking the pro-rata % of the percentage of units priced at less than or equal to 80% AMI
- Standard Conventional Properties: Very Cost-Burdened Renter Markets: Affordability is calculated by taking the pro-rata % of the percentage of units priced at less than or equal to 100% AMI
- Standard Conventional Properties: Extremely Cost-Burdened Renter Markets: Affordability is calculated by taking the pro-rata % of the percentage of units priced at less than or equal to 120% AMI
The list of counties classified as Cost Burdened Renter Markets, Very Cost-Burdened Renter Markets, and Extremely Cost-Burdened Renter Markets is listed on the Multifamily Affordability Estimator Guide. The guide also includes detailed definitions of affordable and targeted affordable properties, rural areas, and a variety of other important inclusions and exclusions involving Fannie Mae's new loan caps and affordability guidelines.