Landlords should brace for changes to multifamily mortgages in 2021

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At the end of 2020, the Federal Housing Finance Agency (FHFA) made two announcements that should impact the multifamily sector of the real-estate market this year. 

Established by the Housing and Economic Recovery Act of 2008, the FHFA has an array of responsibilities including the supervision and regulation of mortgage giants Fannie Mae, Freddie Mac — two government-sponsored enterprises (GSEs) that dominate the US secondary mortgage market. 

Multifamily loan purchase caps for Fannie Mae and Freddie Mac in 2021 will be capped at $70 billion, $10 billion less than last year, per a report by UBS and at least half of the cap, or 50%, will need to be used for affordable housing, up from 37.5% last year. Also, 20% of their multifamily business must be made affordable to residents who make 60% or less of the area’s median income. 

A UBS report questioned whether or not this will detract from the pool of available capital for market-rate deals. Market-rate units are units that have no rent restrictions and don’t have to abide by affordable housing laws. These units can be listed by their landlords in accordance to the going rates in their current markets.

While UBS notes that there are other ways to fund market-rate deals, the GSEs are low-cost sources. A pull back from them could play out as a disadvantage to market-rate deals in 2021.

Though the FHFA 2021 cap requirements are not a President-elect Joe Biden initiative, they do coincide with his plan to tackle the shortage of affordable housing units in the US, which includes creating a $100 billion Affordable Housing Fund — $65 billion of which would be pooled toward building and rehabilitating affordable housing in places where there are shortages.

The FHFA also announced that Fannie Mae and Freddie Mac will allow qualified multifamily property owners to enter into forbearance through March 31, 2021. The program, in place since the start of the pandemic, was originally set to end on December 31, 2020, and is designed to help those behind on their mortgage payments.

Qualified property owners entering the program have to, as laid out by the FHFA, let tenants know in writing about the protections available to them during forbearance and repayment periods. They also aren’t allowed to evict tenants who missed rent during the forbearance period.

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Source:: Business Insider