FHFA Sets $200B Cap on GSE Multifamily Business

The policy change limits loan purchases by Fannie and Freddie to $100 billion apiece and shifts more resources to affordable housing.
The Treasury Department in Washington DC. Image by Brian PIrwiniStockphoto.com

The Federal Housing Finance Agency (FHFA) has revised the cap structure of the multifamily businesses of Fannie Mae and Freddie Mac, setting a $100 billion ceiling on multifamily loan purchases by each of the quasi-governmental entities. The new caps will result in a combined total of $200 billion in support for the multifamily market over the five-quarter period through the fourth quarter of 2020.

The new limits apply to all multifamily business and there will be no exclusions, according to a statement by the FHFA. The federal agency has also directed that mission-driven, affordable housing account for at least 37.5 percent of the enterprises’ businesses, in a bid to undergird support for the financing of affordable homes.

“Multifamily housing is a critical component of addressing our nation’s shortage of affordable housing,” said FHFA Director Mark Calabria in a prepared statement. “These new multifamily caps eliminate loopholes, provide ample support for the market without crowding out private capital, and significantly increase affordable housing support over previous levels.”

Reform builds on Treasury plan

The announcement comes after the U.S. Treasury Department unveiled a long-awaited plan earlier this month to reform the housing finance system and privatize Fannie Mae and Freddie Mac, which have been under government conservatorship since 2008. In its plan, the Treasury recommended action on the caps to more narrowly focus the federal government’s support of the multifamily market on affordability.

The new policy replaces the previous caps on multifamily lending permitted by each enterprise, which last stood at $35 billion. Those limits came with various exemptions for targeted affordable and green lending, resulting in actual multifamily production that was far higher. Freddie Mac chalked up $77.5 billion in multifamily volume in 2018, while for Fannie Mae that figure was $65 billion.

Thus, the new cap structure seems aimed in part at more precisely shaping the enterprises’ support for the multifamily market. At least 37.5 percent of the enterprises’ multifamily business must now be “mission-driven” affordable housing catering to specific, underserved market segments. Loans for energy and water efficiency improvements will now be deemed conventional business unless they meet certain requirements for mission-driven affordability.

The FHFA will count as mission-driven the proportion of the loan amount based on the percentage of units with affordable, unsubsidized rents in a given property. The agency said it expects the enterprises to manage their business to remain in the market through the full five-quarter period to shore up market stability.