Intelligent Investment

Fannie Mae and Freddie Mac Multifamily Loan Purchase Caps for 2022 Announced

October 21, 2021 2 Minute Read

Key insights

Higher caps in 2022 will provide more liquidity to the multifamily mortgage market and should help make the Government-Sponsored Enterprises (GSE) more competitive than they were at certain times during 2021.
 
New mission-driven tests will keep the GSEs focused on affordable housing while creating reasonable "stretch" goals:

  • Re-introduction of the “cost-burdened” and “very cost-burdened” designations should provide more mortgage availability to large coastal markets.
  • Targeted affordable loans will continue to receive very competitive proceeds, pricing and structure.

On October 13, the Federal Housing Finance Agency (FHFA) released the 2022 volume caps establishing a $78 billion cap on multifamily purchase volumes for Fannie Mae and Freddie Mac. The 2022 caps are up more than 10% from 2021. Within the cap, certain loans in affordable and underserved market segments are considered “mission-driven” (as summarized below). For 2022 each GSE must satisfy the following tests:

  1. Minimum of 50% of loan production must be mission driven.
  2. Minimum of 25% of loan production must be affordable to residents at 60% of area median income (AMI) or below. Production that meets the minimum 25% requirement may also count toward the minimum 50% mission-driven requirement. 

As in past years, the FHFA will revisit the volume caps quarterly with the possibility of increasing them. To prevent market disruption, the FHFA will not reduce the caps during 2022.


Figure 1: Comparison between 2021 and 2022 volume caps and mission-driven tests

Image of chart

*2022 definition of mission-driven has changed slightly from 2021.
Source: Federal Housing & Finance Agency, 2021.

Mission-driven definitions

  • Loans on targeted affordable housing (TAH) properties, which are broadly defined as:
    • TAH properties encumbered by a regulatory agreement that restricts rents and income levels of residents. Such properties often use federal, state or local housing subsidies (such as tax-exempt, bond-funded mortgages or low-income housing tax credits).
    • Properties developed under state or local inclusionary zoning, real estate tax abatement or similar loan programs, where the property owner has agreed to restrict a portion of the units for occupancy by tenants with limited incomes and to restrict the rents that can be charged for those units.
    • Properties subject to a Section 8 Housing Assistance Payments (HAP) contract will qualify as a regulatory agreement and will qualify as TAH if the contract limits tenant incomes to 80% of AMI or below.
  • Loans on conventional/market-rate properties can be mission-driven based upon market designations as determined by the FHFA:
    • Standard Markets: based on units affordable at 80% of AMI
    • Cost-Burdened Markets: based on units affordable at 100% of AMI
    • Very Cost-Burdened Markets: based on units affordable at 120% of AMI
  • Loans on certain other properties have special requirements to qualify as mission-driven and include the following types:
    • Seniors housing communities
    • Manufactured housing communities
    • Small-balance loans on properties containing 5-50 units
    • Rural housing communities
    • Green loans, which must be affordable to at least 20% of the units at rents affordable to residents at 60% of AMI or below

For questions and inquiries regarding this FHFA announcement, please contact an advisor with CBRE’s Debt & Structured Finance platform.

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