FHFA Excludes Additional Affordable Housing Lending Categories from GSEs Multifamily Caps
Earlier today, the Federal Housing Finance Agency (FHFA) announced that it is expanding the categories of affordable multifamily loans that Fannie Mae and Freddie Mac may purchase without having to count such activities against their annual caps on multifamily lending.
FHFA’s 2015 Scorecard for Fannie Mae and Freddie Mac caps both Fannie Mae and Freddie Mac’s new multifamily business at $30 billion for 2015, the same limits FHFA put in place in 2013 and 2014. However, to ensure that Fannie Mae and Freddie Mac support lending for affordable housing, the Scorecard allows both firms to exclude from the caps affordable housing loans, loans to small multifamily properties (those below 50 units), and loans to manufactured housing rental communities.
After today’s announcement, additional categories of loans will be exempt from the multifamily caps. Specifically, a prorated portion of multifamily loan amounts purchased by the Enterprises in 2015 will be excluded from the caps based on the percentage of units in a property affordable to renters at 60 percent of area median income (AMI). The affordability threshold for units will be increased to 80 percent AMI in high cost markets and 100 percent AMI in very high cost markets.
In addition, the costs of funding any assisted housing units for seniors will also be excluded from the lending cap as long as the units are affordable to renters at 80 percent AMI. FHFA will also be modifying how it calculates the specific loan amounts excluded from the caps from loans for mixed income housing. FHFA has so far provided no further specifics about how the formula will be modified.
In a statement, FHFA explains that it is making the revisions to increase liquidity in a growing multifamily lending market. Both firms are projected to both reach their multifamily lending caps by the end of the third quarter, which could cause the multifamily market to slow down substantially.
FHFA also argues that the revisions will ensure that Fannie Mae and Freddie Mac continue to support affordable multifamily lending, with FHFA director Mel Watt declaring that the newly revised affordable housing categories make it clear that “we expect the Enterprises to dedicate the necessary time, attention, and resources to support this important part of the multifamily market.”