Here's How Biden's Focus on Affordable Housing Will Impact CMBS

The Biden Administration’s focus on affordable housing is likely to impact the CMBS market in significant ways, a Mortgage Bankers Association spokesman recently told Trepp.

The administration recently announced that the multifamily loan purchase caps next year for Fannie Mae and Freddie Mac will be $78 billion for each, netting a total of $156 billion in support for the multifamily sector. At least of 50% of Fannie and Freddie’s multifamily deals must be in “mission-driven” affordable housing projects, according to the FHFA, and the agency also requires at least a quarter of that business to be affordable to residents at or below 60% of area median income, an increase from 2021’s 20%. And the Department of Housing and Urban Development also announced a plan last month requiring the Federal Financing Bank to loan money to state FHAs and PHAs to create 100,000 units of affordable housing over the next three years.

Mike Flood, the MBA’s Senior Vice President Commercial/Multifamily Policy and Member Engagement, told Trepp in an interview this week that the proposed changes will produce “some clear winners and losers.” He noted that the FHFA previously required at least 20% of GSE’s multifamily business to be affordable to residents at or below 125% of AMI, and with the reduction to 60% GSE lenders will gain while CMBS lenders will lose. And the HUD proposal will compete with another of its own initiatives that intends to streamline the multifamily loan process, which may in turn impact private CRE developers.

In addition, “the revision of the Conservatorship Capital Framework proposed by the FHFA is a clear benefit to CMBS investors,” Trepp’s Jack LaForge writes. “The lowered capital charge in the proposed revision intends to encourage the transfer of capital risk to private investors, opening the CMBS market for more investment.”