GSEs' 2021 Lending Caps Double Down on Affordable Housing

The Federal Housing Finance Agency has unveiled the lending caps for Fannie Mae and Freddie Mac in 2021, and they are coming with some changes. FHFA has set $70 billion in multifamily lending caps for the two housing agencies in 2021, giving them a combined lending power of $140 billion; however, at least 50% of the loan originations must be dedicated to affordable housing. The change comes in light of the pandemic, which has only served to deepen the severity of the national housing crisis.

Already, some key players in the multifamily market have responded favorably to the announcement. Walker & Dunlop, one of the most active multifamily lenders and largest Fannie Mae DUS lenders, applauded the announcement. “Of note in the 2021 lending cap announcement from the FHFA was raising the percentage of affordable lending that Fannie Mae and Freddie Mac must do from 37.5% to 50%,” Willy Walker, chairman and CEO of Walker & Dunlop, said in a statement following the announcement. The firm has lent more than $17 billion in the past three years with the GSEs on affordable properties, and it remains focused on serving the asset class.

The new lending caps also come with a mandate that at least 20% of Fannie and Freddie multifamily lending target affordable housing for residents at 60% area median income or less. This ensures that the agencies will continue to finance communities for residents that are most in need of affordable housing options.

It is important to note that FHFA also revised the definition of affordable housing as well. To qualify as affordable housing, the property must be affordable for residents at 80% of area median income or below, and it included special provisions for rural housing and for manufactured housing communities. In rural communities, affordable housing must qualify residents making 100% of the median area income.

At the start of the pandemic, the agencies paused lending activity and rolled out new policies to support borrowers facing potential income issues during the pandemic. In an earlier interview with GlobeSt.com, Freddie Mac SVP Rich Martinez said that the agency was back in the market by May. “Business started picking up, putting us on a steady pace toward the FHFA-set volume cap by year end, including targeted affordable housing,” he said in the interview. He also added that he was happy with the agency’s response to the pandemic. “By any measure, I think we have succeeded so far in our mission of providing liquidity and ensuring stability in the multifamily space. I am very proud of the way we transitioned from office to home in the middle of a pandemic.”