Fannie Mae, Freddie Mac multifamily caps to rise by $8 billion in 2022

Annual multifamily limits for Fannie Mae and Freddie Mac will increase by $8 billion each in 2022 with a higher requirement in one affordable housing subcategory and new energy efficient inclusions.

Each government-sponsored enterprise will be able to buy loans with a total unpaid principal balance of $78 billion during the year, according to the Federal Housing Finance Agency. The minimum 50% affordable housing requirement will remain the same, but the share allotted to those with an area median of income of 60% or less will rise to at least 25% from 20%. Added to the sub-category will be energy or water efficient improvements made to units affordable to people at that income level.

"The higher mission-driven business requirements assure that the enterprises' multifamily businesses have a strong and growing commitment to affordable housing finance," said FHFA acting Director Sandra Thompson, in a press release.

The rise in the caps stops just short of restoring what was effectively a cut made to the annual limits in 2021 under the Trump administration. The cap for this year is currently $70 billion, which is down from the previous five-quarter period in which there was a $100 billion cap, or $80 billion annually.

Fannie Mae at one point earlier this year adjusted pricing to slow its purchases of multifamily loans and keep pace with the current $70 billion cap, and by the second quarter its loan volume had fallen from $21.5 billion to nearly $10.9 billion. In comparison, Freddie Mac’s new business numbers for the first and second quarters were $14 billion and $13 billion, respectively.

Both GSEs issued press statements supportive of the 2022 caps.

“FHFA’s enhancements to our mission focus and 2022 volume cap increase will allow Freddie Mac to better support the multifamily market in the year to come,” said Debby Jenkins, an executive vice president at Freddie Mac.

Fannie welcomed the inclusion of “green” financing in the affordable housing requirement in particular.

“FHFA’s focus on mission-driven, affordable multifamily housing echoes Fannie Mae’s commitment to preserving and expanding the affordable housing supply, as well as financing quality green and sustainable rental units,” said Michele Evans, an executive vice president.

The Mortgage Bankers Association also welcomed the move, with President and CEO Bob Broeksmit stating that the changes “support affordable multifamily housing and help ensure a level playing field across the various capital sources.”

The GSEs’ regulator has the discretion to adjust the caps if needed. However, to prevent market disruption, if FHFA determines that the actual size of the 2022 market is smaller than was initially projected, it will not reduce the caps.

Under the Obama administration, multifamily purchases were capped at just $35 billion for each GSE. However, mission-related exclusions were allowed during the Obama era, including those financing for energy and water efficient projects. The Trump administration removed those exclusions.