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$16B increase to agency caps should benefit small multifamily investors

Multifamily purchase caps limit the amount of capital Fannie Mae and Freddie Mac can lend on an annual basis through their multifamily loan programs. As a result, the caps serve as a key driver to the competitiveness of their loan terms, such as interest rates, including those offered through their multifamily small loan programs.

 

FHFA announces an increase in multifamily loan purchase caps

Today, the Federal Housing Finance Agency (FHFA) announced the 2022 multifamily loan purchase caps for Fannie Mae and Freddie Mac. Each agency will be capped at $78 billion, an $8 billion increase over their 2021 caps.

To ensure a focus on traditionally underserved markets and properties that provide affordable housing, the FHFA is also requiring that at least 50% of this multifamily business meet its definition of “mission-driven” affordable housing.

Another 25% must be affordable at or below 60% of area median income (AMI), up from 20% in 2021. Additionally, the FHFA is updating their definition of “mission-driven” business which includes an increase in the portion of loans on small multifamily properties (5 – 50 units) that will qualify.

 

How could these changes benefit small multifamily investors like you?

  • An increase to multifamily purchase caps means that Fannie Mae and Freddie Mac will have a greater supply of capital to lend in 2022 and will do so by offering competitive loan terms for multifamily properties, both large and small.
  • Given the affordable nature of smaller multifamily properties, as well as the more favorable qualification of small loans as “mission-driven” business, Fannie Mae and Freddie Mac should be incentivized to focus on small loan business to ensure they meet or exceed the increased targets for affordable housing in 2022.

More positive momentum heading into 2022

This favorable announcement comes on the heels of a proposed 130% increase to the FHFA’s housing goal related to 5-50 unit properties, which should also bode well for the competitiveness of Fannie Mae and Freddie Mac’s small loan programs throughout 2022 and beyond. In fact, we’re already seeing more competitive terms from Fannie Mae, which decreased their small loan interest rates by almost 0.50% just this week.

 

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