FHFA Loan Caps for 2024: What Multifamily Borrowers Need to Know

FHFA Loan Caps for 2024 Contract with Headwinds Expected

The Federal Housing Finance Agency (FHFA) announced a $10 billion rollback of Fannie Mae and Freddie Mac’s volume cap for loan purchases for 2023 to $140 billion ($70 billion for each agency). This move aligns with industry expectations, given the anticipation of continued headwinds for the multifamily in 2024. Next year’s cap for the Government-Sponsored Entities (GSEs) is a reduction of approximately 7% from the $150 billion limit set for 2023 and a return to the level it was in 2021.

“A cap of $70 billion for each of the GSEs is reasonable, given the challenging market conditions and high interest rate environment expected in 2024,” said Mortgage Bankers Association President and CEO Bob Broeksmit, CMB, in a statement.

FHFA said it will continue to monitor the multifamily mortgage market and increase the caps if necessary. However, if FHFA determines that the actual size of the 2024 market is smaller than initially projected, it pledges not to lower its cap levels.

Workforce Housing Lending Now Exempt from Caps

New for 2024, FHFA will allow workforce housing loans to be exempt from the volume cap. FHFA added a new mission-driven lending category in 2023 for workforce housing designed to encourage the preservation of affordable housing near places of employment, schools, and hospitals. This initiative incentivizes the financing of properties where a borrower commits to preserving affordability through rent or income restrictions for 10 years of the loan term. Affordability levels correspond to 80 to 120% of area median income (AMI), depending on the market.

Mission-driven Lending Tops FHFA Agenda

Mission-driven remains a stated priority for FHFA loan caps for 2024. It has kept the requirement that 50% of Fannie Mae and Freddie Mac’s total loan business supports mission-driven, affordable housing unchanged. But for next year, it will remove the requirement that 25% of GSEs’ multifamily business be affordable at 60% of AMI or below.

Loans for targeted affordable housing properties can be classified as mission-driven in proportionate amounts, depending on the percentage of units that are restricted by a regulatory agreement or recorded use restriction. FHFA defines mission-driven housing as properties affordable for residents at 80 percent of AMI or below, with special provisions for rural housing and manufactured housing communities. Examples of loans that could be classified as mission-driven under this policy include those subsidized by the Low-Income Housing Tax Credit (LIHTC) program and loans on properties covered by a Section 8 Housing Assistance Payment contract where the contract limits tenant incomes to 80 percent of AMI or below.

Green Financing Benefits Maintain Same Requirements for 2024

In 2024, Fannie Mae’s Green Rewards and Freddie Mac’s Green Advantage will remain attractive for investors who want to take advantage of FHFA’s green retrofit benefits. Green loans that are used to facilitate water or energy improvements with units affordable at or below 80 percent of AMI will be classified as mission-driven.

Source: Arbor