FHFA Sets New Caps for Fannie Mae and Freddie Mac Multifamily

Fannie and Freddie's Purchasing Caps Have Been Raised To $100 Billion Each Between Q4 2019 to Q4 2020

The Federal Housing Finance Agency (FHFA) announced today that it’s setting new caps for the volume of multifamily loans that can be purchased by Fannie Mae and Freddie Mac between Q4 2019 and Q4 2020. Over these five quarters, the agencies loan purchasing caps will be raised to $100 billion each, for a total loan purchase amount of $200 billion. In addition, a minimum of 37.5% of each agency's purchase volume must involve the purchase of loans for affordable properties.

Fannie and Freddie's new multifamily loan caps will not exclude property types such as green loans, affordable housing loans, or small balance loans. For every $1 billion in loans purchased by the agencies, at least $375 million (37.5%) of them must be for affordable housing.

Unlike past caps, which have excluded certain types of multifamily financing, including green loans, small balance loans, and affordable housing loans, these new caps will have no exclusions. Specifically, loans that go towards funding energy and water efficiency improvements for market-rate properties will now be classified as conventional loans. However, for affordable properties, energy and water efficiency improvement loans may also be counted as affordable.

The FHFA says these cap reforms are due to the fact that Fannie and Freddie’s multifamily business has simply grown far too fast to be sustainable. For one, the growth of Fannie and Freddie’s multifamily lending business has far outpaced the growth of the multifamily market as a whole. While the multifamily sector grew approximately 14% between 2015 and 2017, agency loan purchases increased by more than 50%. In 2017, 49% of all multifamily originations could be attributed to Fannie Mae or Freddie Mac. In addition, while the agencies’ share of outstanding multifamily debt was 25% at the end of 2007, it had ballooned to 40% by the end of 2018.

Overall, the FHFA hopes these changes will leave room for more private capital in the multifamily market while increasing the amount of capital available for affordable properties.