White House rental protections may create opportunities for lenders

The Federal Housing Finance Agency has a role in the Biden Administration's rental housing initiative and multifamily lenders should benefit.

As the regulator of the government-sponsored enterprises, it will be looking at Fannie Mae's and Freddie Mac's activities that promote renter protections, the White House fact sheet on the initiative stated.

"As part of our work on the White House Tenant Protection Interagency Policy Council, FHFA will conduct a public stakeholder engagement process to identify tangible solutions for addressing the affordability challenges renters are facing nationwide, particularly among underserved communities," Director Sandra Thompson said in statement issued in response to the Biden Administration announcement. "Our process will be transparent and seek broad participation from diverse voices."

Common ground exists between the White House and the FHFA to get Fannie Mae and Freddie Mac involved in implementing its housing policies, said Evan Blau, a partner at the law firm of Cassin & Cassin who represents lenders in the financing of multifamily properties with an emphasis on affordable housing.

The FHFA's 2023 scorecard for the GSEs requires that 50% of their multifamily lending this year be "mission driven." Based on the combined 2022 volume, that is a substantial amount of financing, Blau added.

Last year, Fannie Mae and Freddie Mac together financed $142 billion in multifamily mortgages for over one million units. "If the same activity holds in 2023, this would mean an investment in approximately 700,000 affordable units," the White House Fact Sheet stated.

That total was below the FHFA's cap on multifamily activity for the GSEs, which was a combined $156 billion. This year, the regulator reduced the cap to $150 billion or $75 billion each.

"What the White House is doing is finding the synergy between the common goals of the White House, FHFA, Fannie and Freddie and I think everyone obviously is aligned in the right direction and that's creating products that are geared towards generating [and] financing more affordable housing," Blau said.

Fannie Mae and Freddie Mac have already embraced that mission critical aspect. "In the last five years, we've seen them come out with these fantastic products that are geared specifically towards affordable housing," Blau said. "This is really just a continuation of what we've seen in the past, which is this interplay of the various agencies — FHFA, Fannie and Freddie — in terms of their goals."

The Mortgage Bankers Association expects an 11% year-over-year decline in multifamily lending volume as the sector faces the same forces that will limit single-family originations, the trade group said earlier this month.

It predicted $393 billion of multifamily lending volume this year, down from a projected total of $439 billion for 2022. The total includes all investor sources, not just Fannie Mae and Freddie Mac. In 2021, multifamily mortgage originations totaled a record $487.3 billion.

Blau agreed that interest rates and the U.S. economy will dictate multifamily lending activity this year. But he noted that within that framework, the Biden administration's announcement is a positive for the finance side of the business.

"The agencies have the runway to metaphorically land as many planes as they can within their framework and within their volume caps," he said. 

While the economy will need to settle as it is likely heading towards what some are expecting to be a mild recession, "I do think [the administration's initative] will lead to more loans being made in the affordable housing field," as the GSEs look to make their FHFA goals," Blau said.

Agency lenders have built out their infrastructure in the last 5-10 years to handle complex affordable housing deals. "We're seeing extremely sophisticated transactions being done by Fannie and Freddie lenders that are around the products that Fannie and Freddie have developed with FHFA's oversight," Blau noted.

He expects even more creativity from the GSEs going forward when it comes to affordable housing and the lenders themselves are well-equipped to handle the additional volume and deal flow.

"Increasing the supply of affordable rental housing is the best way to solve the ongoing affordability crisis, and MBA is committed to working with the Administration, Congress, and other policymakers on safe and sound policies at the federal and state level that encourage development and keep financing and construction costs in check," President and CEO Bob Broeksmit said in a statement. "We will examine the Administration's actions in greater detail and participate in a constructive and collaborative approach to help tenants and increase safe and affordable multifamily housing."

As part of that 2023 scorecard, FHFA asked Fannie Mae and Freddie Mac "to explore the feasibility of expanding tenant protections for properties they finance and to identify strategies and activities that would facilitate a greater amount of affordable rental housing supply," Thompson said in her statement. "FHFA will continue to evaluate the Enterprises' role in providing tenant protections and advancing available affordable housing opportunities for those in need."