Insights

FHFA Sets Agency Lending Caps for 2023

November 21, 2022

The Federal Housing Finance Agency (FHFA) announced that the 2023 multifamily loan purchase caps for Fannie Mae and Freddie Mac will be $75 billion each, totaling $150 billion.

The Federal Housing Finance Agency (FHFA) announced that the 2023 multifamily loan purchase caps for Fannie Mae and Freddie Mac will be $75 billion each, totaling $150 billion. This is a $6 billion reduction from 2022, likely indicating an anticipated drop in overall multifamily mortgage activity next year.

FHFA may increase the cap if the market is larger than expected, however, it will not reduce the caps if the market is smaller.  It is worthwhile to note that the Agencies each funded approximately $70 billion in 2021 and appear on track to fund nearly the same in 2022, which is short of their $78 billion cap, illustrating there is room to increase production from current levels.

As was required in 2022, FHFA is requiring 50% of the Enterprises’ multifamily business to be mission-driven affordable housing to ensure a strong focus on affordable housing and traditionally underserved markets.

FHFA made the following additional changes for 2023’s new cap requirements:

  1. Eliminated the requirement that 25 percent of units be affordable at 60 percent of AMI or below, which alleviates some pressure on the Agencies to finance more deeply affordable units.
  2. Created a new category focused on preserving affordability: workforce housing. This encourages financing of loans on properties with rent or income restrictions affordable at levels that meet market needs.
  3. Eased the affordability threshold on green loans with energy and water efficiency improvements to qualify as mission-driven to 80 percent of AMI (up from 60 percent of AMI in 2022) making it a bit easier for Agencies to finance, opening up more appetite for Class A, non-mission-driven business.
  4. Included loans on seniors housing and small 5-to-50-unit multifamily properties in the “Other Affordable” mission-driven category. This change streamlines the mission-driven definitions, but maintains the same affordability focus as in 2022.

Greystone’s Rick Wolf, Senior Managing Director, commented, “The cap reduction is certainly in line with expectations for how the market is expected to perform, and we are optimistic about our ability to continue to drive the needed mission-based volume to support the Agencies’ goals. The caps are also an affirmation of the critical role the Agencies play in the multifamily market, as they clearly want to maintain market share in housing finance. We continue to see adjustments in support of their desire to provide a competitive execution for multifamily owners.”

He added, “The elimination of the unit requirement for affordable housing enables market participants to focus on driving all qualified affordable, workforce housing, or little ‘A’ assets to an Agency execution as an additional way to meet mission-driven goals.”

CREFC offers a side-by-side analysis of the Agency caps over the years here.

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