FHFA updates GSE multifamily loan limits in face of market correction

New loan cap "will shape how we approach the multifamily market in the year ahead"

FHFA updates GSE multifamily loan limits in face of market correction

The Federal Housing Finance Agency (FHFA) has updated the new loan purchase caps for Fannie Mae and Freddie Mac’s multifamily businesses to reflect the anticipated contraction of the multifamily originations market.

FHFA has set the GSEs’ multifamily loan purchase limits to $75 billion for 2023. That’s compared to the loan cap of $78 billion for 2022 and $70 billion for 2021. According to the agency, the multifamily loan limits are based on projections for the size of the multifamily debt origination market.

“The 2023 multifamily loan caps, coupled with a new mission-driven category for workforce housing properties, will continue to ensure that the enterprises have a strong commitment to addressing the need for affordable housing,” said FHFA director Sandra Thompson. “The new workforce housing category will provide incentives for conventional borrowers to maintain rents at affordable levels for extended periods of time.”

FHFA said it would allow loans to finance energy or water efficiency improvements with units affordable at or below 80% of AMI to be classified as mission-driven, up from 60% AMI in 2022.

“This increase will allow the enterprises to expand their effort on energy and water conservation measures at workforce housing properties,” FHFA said in a press release.

The regulator also updated the criteria for Fannie Mae and Freddie Mac’s “mission-driven” businesses, which includes loans for affordable housing and underserved market segments. As per FHFA’s requirements, 50% of the firms’ multifamily businesses must be mission-driven, which the regulator defined as loan purchases that support:

  • Targeted Affordable Housing properties where all or a portion of the units are income or rent-restricted as a result of a regulatory agreement or a recorded use restriction
  • Workforce Housing properties where units are subject to either rent or income restrictions that are codified in loan agreements
  • Other affordable units where rents are affordable to tenants at various income thresholds but are not subject to tenant income or rent restrictions
  • Properties located in rural areas as defined by the Duty to Serve regulation
  • Manufactured Housing Communities that receive credit under the Duty to Serve regulation, which requires tenant pad lease protections
  • Energy- or water-efficiency improvements for units affordable at or below 80% of the area median income

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“The loan purchase cap and new mission-driven requirements will shape how we approach the multifamily market in the year ahead,” said Kevin Palmer, head of Freddie Mac Multifamily. “As always, our goal is to be a consistent source of liquidity with a keen focus on supporting affordable multifamily housing. FHFA has again set strong mission requirements that set a clear north star for our business.”