NEW VOLUME CAPS ANTICIPATE ORIGINATIONS CONTRACTION YET BROADEN THE DEFINITION OF MISSION-DRIVEN HOUSING
The Federal Housing Finance Agency (FHFA) has announced the 2023 multifamily volume cap structure for the Government-Sponsored Enterprises (GSEs) Fannie Mae and Freddie Mac. These caps are set each year to ensure enough liquidity for the multifamily market – with a particular emphasis on affordable housing – without crowding out private capital.
For 2023, FHFA has set the volume cap for loan purchases at $150 billion, or $75 billion for each agency. This is a slight decrease (3.85%) from the 2022 cap of $156 billion ($78 billion for each agency), reflecting "an anticipated contraction of the multifamily originations market," according to the press release. Data from the Mortgage Bankers Association released in early October projects that multifamily originations will hit near $451 billion for 2023, down narrowly from the $455 billion estimated for 2022, with rising interest rates and cap rates as the primary culprits.
The new cap structure provides several benefits for affordable and workforce housing. While 50 percent of 2023’s GSE business must be for mission-driven business (unchanged from 2022), FHFA has removed certain AMI requirements and broadened the types of properties that can qualify as mission-driven. Here we outline some of the most substantial adjustments:
Expanded NOAH Capacity
FHFA has removed the requirement that 25% of the GSEs multifamily business be affordable at 60% of Area Median Income (AMI) or below, effectively freeing up additional capacity to finance more naturally occurring affordable housing (NOAH).
Green loans that facilitate water or energy improvements are now classified as mission-driven for units at or below 80% of AMI. This adjustment is up from 60% AMI in 2022 and should expand the green retrofit benefits offered by Fannie Mae's Green Rewards and Freddie Mac's Green Advantage programs.
A new mission-driven category was created to focus on preserving affordability in workforce housing, encouraging financing for properties where a borrower commits to preserving affordability through rent or income restrictions for 10 years of the loan term. This measure is intended to support residents living closer to places of employment, schools and hospitals.
Though the FHFA caps indicate there will be less Fannie Mae and Freddie Mac multifamily volume in 2023, NewPoint remains dedicated to providing our clients with the best executions available. As a full spectrum provider to the rental housing industry, we’ve developed an innovative product suite of proprietary capital solutions through our Bridge Financing and NewPoint Impact programs.