Good News in FHFA Affordable Housing Goals

Published by Peter Lawrence on Tuesday, September 15, 2015 - 12:00am

In a victory for the affordable housing community, Fannie Mae and Freddie Mac will finance more multifamily units for low- and very-low-income families under goals in a final rule by the Federal Housing Finance Agency (FHFA) that will become official soon. It was published Sept. 3 in the Federal Register.

The FHFA released the final rule in August, with affordable housing goals for 2015 through 2017 for both of the government-sponsored enterprises (GSEs). The final rule also creates a new subgoal for the GSEs’ purchases of mortgages on small multifamily properties that are affordable to low-income families.

Those in the affordable housing community who have been looking for more assistance from the FHFA have reason for optimism, with the increase in affordable rental units financed by the GSEs, as well as the important first step of establishing goals for small multifamily properties financed by them.

Highlights of the final rule concerning affordable multifamily housing include:

  • Through 2017, Fannie Mae and Freddie Mac will each be expected to finance at least 300,000 rental housing units annually that are affordable to low-income families (those with incomes less than 80 percent of the area median income [AMI]). Those goals are an increase of 50,000 units for Fannie Mae and 100,000 for Freddie Mac from the 2014 proposed rule benchmarks. FHFA said the increase was due to an expansion in the overall size of the multifamily finance market.
  • The FHFA’s subgoal for both Fannie Mae and Freddie Mac financing multifamily properties with units affordable to very-low-income families (those with income less than 50 percent of the AMI) is 60,000 rental units. That’s the same as the 2014 proposal target for Fannie Mae, but an increase of 41,000 over the three years for Freddie Mac.
  • The subgoal for both GSE’s purchase of mortgages of small multifamily properties (those between five and 50 rental units) that are affordable to low-income families is 6,000 units in 2015, 8,000 units in 2016 and 10,000 units in 2017. While this is the first time the FHFA has set goals for affordable units in small multifamily properties, the final rule totals are a decrease from goals in the proposed rule, which were 20,000, 25,000 and 30,000 for Fannie Mae and 5,000, 10,000 and 15,000 for Freddie Mac.

The proposed rule was issued in August 2014 and received more than 140 comments. The final rule will become effective Oct. 3. It’s the latest in a series of goals that the government has set for Fannie Mae and Freddie Mac for providing liquidity for affordable housing financing. The GSEs have exceeded the goals for the past several years.

In addition to multifamily rental housing, the final rule also sets goals and subgoals for single-family home purchase mortgages and refinances for low-income and very-low-income families.

The increase in the number of affordable units in multifamily housing properties to be financed by the GSEs is significant, but equally important are the FHFA’s goals for purchasing mortgages of affordable small multifamily properties. The final numbers are smaller than the proposed amounts, but the goals will still provide less-expensive financing for smaller buildings, which are often owned by individuals or smaller investors, who often have a harder time accessing capital for developments.

Next up for FHFA are final regulations on the GSE “duty to serve,” which would require Fannie Mae and Freddie to increase mortgage financing liquidity for affordable housing preservation, rural housing and manufactured housing. Included among the programs targeted for affordable housing preservation are properties assisted by HUD Sections 8, 236, 202 and 811, as well as McKinney-Vento homeless assistance, U.S. Department of Agriculture’s (USDA) Section 515, and LIHTC. FHFA published an advance notice of proposed rulemaking in August 2009 on the “duty to serve,” and the affordable housing community has been awaiting final regulations since.

As for the FHFA final rule concerning affordable housing goals, any policies that increase available financing for affordable housing should be considered good news. This rule does that.