FHFA, GSEs Announce 2024 Multifamily Caps, New Pilot Program
Written By: Joel Palmer, Op-Ed Writer
With the end of 2023 just a month away, the mortgage industry is well into preparing for 2024. This includes a pair of announcements from the Federal Housing Finance Agency (FHFA) and the Government Sponsored Enterprises (GSEs) it oversees.
Last week, FHFA announced that Fannie Mae and Freddie Mac will each have a $70 billion purchase cap for multifamily mortgage loans in 2024. Next’s year cap is $5 billion lower for each enterprise compared with the 2023 cap and $8 billion lower than the 2022 cap. In 2021, the cap was also $70 billion.
Caps have been in place on the GSEs’ multifamily business since 2015. FHFA said the purpose is to ensure liquidity in the multifamily market, especially in affordable housing and underserved segments, without crowding out private capital.
Since 2022, FHFA has required that at least 50 percent of its multifamily businesses be mission-driven, affordable housing. This requirement remains in place for 2024.
One change in next year’s cap is an exclusion for loans classified as “supporting workforce housing properties.” This is defined as a property that “has units that are subject to either rent or income restrictions codified in loan agreements.”
FHFA will classify as mission-driven 50 percent of the loan amount if the percentage of restricted units is less than 20 percent of the total units in a project, and 100 percent of the loan amount if the percentage of restricted units is equal to or more than 20 percent.
All other mission-driven loans remain subject to the volume caps. These projects include:
Targeted Affordable Housing properties where all or a portion of the units are income or rent restricted as a result of a regulatory agreement or a recorded use restriction.
Other affordable units where rents are affordable to tenants at various income thresholds but are not subject to tenant income or rent restrictions.
Properties located in rural areas as defined by the Duty to Serve regulation.
Manufactured Housing Communities that receive credit under the Duty to Serve regulation, which requires tenant pad lease protections.
Certain loans to finance energy- or water-efficiency improvements.
“The 2024 multifamily loan caps, coupled with the exemption for workforce housing properties from the caps, will promote the enterprises’ continued strong commitment to addressing the need for affordable rental housing,” said FHFA Director Sandra L. Thompson. “The workforce housing exemption should encourage conventional borrowers to commit to preserving rents at affordable levels for extended periods of time.”
Another 2024 initiative recently announced is a pilot program by Freddie Mac designed to replace its current repurchase policy for defective performing loans with a fee-based structure.
Freddie stated that under the pilot program, lenders will not be subject to repurchases on most performing loans. They will instead be subject to a fee-based structure based on non-acceptable quality (NAQ) rates.
Freddie said the fee will apply uniformly to medium and large lenders based on NAQ rates and will be waived for smaller lenders that do not deliver a large enough volume to generate a statistically significant NAQ rate. Loans that are non-performing within 36 months or subject to life of loan defects will still be subject to repurchase.
Freddie said the fee-based structure will be more efficient, transparent and reward lenders that deliver high-quality loans.
The fee structure will begin with a limited rollout with targeted lenders in early 2024.
About the Author
As an NAMU® Opinion Editorial Contributor, Joel Palmer is a freelance writer who spent 10 years as a business and financial reporter and another 10 years in marketing for the insurance and financial services industries. He regularly writes about the mortgage industry, as well as residential and commercial real estate, investments, and retirement income planning. He has also ghostwritten books on starting a business, marketing, and retirement income planning.
