Multifamily lending caps for Fannie Mae and Freddie Mac have been set at $35 billion for 2019, unchanged from the 2018 caps, the Federal Housing Finance Agency (FHFA) announced.
The caps are based on the FHFA’s projections of the overall size of the 2019 multifamily originations market, which the agency expects to be relatively flat compared to the market in 2018.
In setting the caps, the FHFA also considers multifamily market estimates developed by industry participants and analysts.
As in prior years, the agency will review its estimates of the multifamily loan origination market size on a quarterly basis, including consultation with industry stakeholders and Fannie Mae/Freddie Mac and will adjust the caps if necessary.
To prevent disruption in the market, if the FHFA determines that the actual size of the 2019 market is smaller than was initially projected it will not reduce the caps, however.
The multifamily lending caps are intended to further the FHFA’s strategic goal that Fannie Mae and Freddie Mac provide liquidity for the multifamily market without impeding the participation of private capital, the agency says in a release.
Because market support for affordable multifamily housing has historically been limited, the agency will continue to exclude from the 2019 caps certain loans in the affordable and underserved market segments.
For 2019, FHFA is making the following changes to these excluded categories:
Loans to Finance Energy or Water Efficiency Improvements
The FHFA is increasing the requirements for exclusion from the multifamily cap loans that finance energy or water efficiency improvements through Fannie Mae’s Green Rewards and Freddie Mac’s Green Up/Green Up Plus programs.
To qualify for exclusion from the cap, multifamily loans that finance energy or water efficiency improvements must project a minimum 30% reduction in whole property energy and water consumption and a minimum of 15% of the reduction must be in energy consumption.
The FHFA is also adding a data collection requirement for all excluded Green Rewards and Green Up/Green Up Plus loans, which requires engagement of a third-party data collection firm prior to closing.
The consumption reduction threshold ensures that the benefits from green renovations are passed through to the tenants, while the added data requirement allows FHFA to assess the efficacy of the GSEs’ green improvements programs on an ongoing basis.
Loans on Affordable Units in Cost-Burdened Renter Markets
To address the critical shortages of affordable rental housing in specific markets, the FHFA has developed a data-driven approach it will follow to designate markets in which units affordable to cost-burdened renters at certain area median income levels will be excluded from the multifamily cap on a pro-rata basis.
This data-driven process will ensure that exclusions from the cap are focused on markets where renters are most cost-burdened and will result in less variation in market designations over time and offer greater stability to the multifamily market.
Further details will be provided in the agency’s 2019 Scorecard.