Feds See Smaller Multifamily Finance Market in 2018
FHFA Lowers 2018 Multifamily Lending Caps for Fannie Mae and Freddie Mac
by Mark Heschmeyer | CoStar
Following two years of increased originations, the Federal Housing Finance Agency (FHFA) is lowering its projections for the multifamily lending market in 2018.
FHFA, which oversees Freddie Mac and Fannie Mae, announced that the 2018 multifamily lending caps for each government-sponsored enterprise will be $35 billion. That is down from $36.5 billion in 2017. The 2018 limit returns to the same lending cap set in 2015 and reflects the FHFA's expectations that the overall size of the 2018 multifamily originations market will be slightly smaller next year.
In fact, the nation's largest 25 banks have already cutback on multifamily lending. The amount of multifamily loans on their books has shrunk $3.3 billion through Nov. 22 since the end of July, according to Federal Reserve data.
However, all other U.S. banks continue to grow their multifamily lending, which is up $7.2 billion since July.
As in prior years, FHFA said it plans to review its estimates of the multifamily loan origination market size on a quarterly basis and make adjustments to its lending caps if necessary. The FHFA said the caps are intended to provide liquidity for the multifamily market without impeding the participation of private capital lender.
The lone exception will be loans for affordable housing. Because is believes market support for this sector has remained historically weak, FHFA said it will continue to exclude certain loans in the affordable and underserved market segments from the 2018 caps.
In addition, FHFA is making a couple other changes, adding loans to finance energy or water efficiency improvements and loans on affordable units in extremely high cost markets to the categories excluded from the lending caps.
To qualify for exclusion from the cap FHFA will require multifamily loans that finance energy or water efficiency improvements through Fannie Mae's Green Rewards and Freddie Mac's Green Up/Green Up Plus to provide a 25% energy or water savings.
Also, to address what it calls critical shortages of middle-income housing, FHFA is adding what it calls an "extremely high cost" market category. Units at rents affordable to those at or below 120% of the area median income in extremely high cost markets will be eligible for exclusion from the cap on a pro-rata basis.
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