Green Loans No Longer Excluded from Caps on Multifamily Lending
The Federal Housing Finance Agency (FHFA) has revised and increased the caps on multifamily lending by Fannie Mae and Freddie Mac. The new caps, effective as of October 1, 2019, are $100 billion for each agency for the five-quarter period running Q4 2019 through Q4 2020. These caps represent an increase from prior limits and indicate continued bullishness for the multifamily originations market.
Multifamily lending exclusions eliminated
In a tradeoff, the regulations have eliminated all exclusions, including the popular exclusion for green loans such as Fannie Mae’s Green Rewards and Freddie Mac’s Green Up programs. (These are multifamily loans that provide financing for energy efficiency improvements). Under prior policy enacted in 2016, there were no limits on the amount of multifamily green loans. As a result of the exclusions, which the regulators felt had become overly broad, the agencies’ market share has grown sharply. In fact, nearly half of the agencies’ loans were excluded from prior caps due in large part to the green programs (see chart below).
In other regulatory changes, the new guidelines mandate that 37.5% of all lending by the government-sponsored enterprises (GSEs) qualify as affordable housing by meeting certain definitions of “mission-driven loans.” This reflects the FHFA’s increasing emphasis on affordability and continued efforts to address the problem of lack of affordable housing across the United States:
“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,” FHFA Director Mark Calabria said in prepared remarks.
Prior to the enactment of the changes, GSE lending had slowed due to uncertainty in the marketplace. Because the new regulations will ensure good liquidity in the lending market for the next five quarters, they have been well received by borrowers and lenders.
Fannie Mae and Freddie Mac loans continue to be the most popular financing vehicles for CLF clients trading in stabilized multifamily assets.
About the author
Kevin Caiaccio, founder of Caiaccio Law Firm, has more than 25 years of experience practicing commercial real estate law. His cut-through-the-noise mentality encourages clients and colleagues to be selective and focus on big-picture solutions. He believes in fighting for what’s important, and filtering through obstacles that distract.