FHFA Expands Multifamily Lending Caps for Fannie and Freddie

The Federal Housing Finance Agency (FHFA) recently announced that it will increase caps on the amount of multifamily loans Fannie Mae and Freddie Mac can purchase next year while also closing some loopholes. The regulatory agency will now limit the two firms to purchasing $100 billion in multifamily-housing residential loans, respectively, between the fourth quarters of 2019 and 2020. The caps are substantially larger than in previous years. In 2018 and 2019, Fannie Mae and Freddie Mac were allowed to purchase only $35 billion in multifamily loans each; however, “mission-driven” loans excluded from the caps brought the total volume to $142.5 billion in 2018.

In addition to increasing the multifamily cap size, the FHFA made other revisions to how Fannie and Freddie can conduct their multifamily businesses. In particular, the agency will now require the two firms to have over one-third of their multifamily activities directed toward affordable housing.

This can include loans on properties subsidized by the LIHTC program, loans on developments created under inclusionary zoning rules, and loans on properties covered by a Section 8 Housing Assistance Payment contract.

The FHFA’s choice to expand the lending caps comes as the Trump administration called on the Treasury Department and the FHFA to consider limiting Freddie and Fannie’s multifamily footprint as part of its broader plan for housing finance reform.