GSE’s 2021 market caps could mean capital shortage at market rate by year-end


Last month, the Federal Housing Finance Agency announced $ 70 billion in multi-family loan ceilings for Fannie Mae and Freddie Mac in 2021. In 2020, those caps were $ 80 billion each for Freddie and Fannie.

At least 50% of GSE loan origination must be devoted to affordable housing, which is an increase from 37.5% in 2020. Limits apply to four quarters of calendar year 2021, up from five. quarters totaling $ 100 billion in the previous cap. , according to Marcus & Millichap.

The new loan limits come with a mandate that at least 20% of Fannie and Freddie’s multi-family loans target affordable housing for residents with a median income of 60% or less. This ensures that agencies will continue to fund communities for residents most in need of affordable housing options.

The FHFA has also revised the definition of affordable housing. Homeownership must be affordable for residents at 80% of the region’s median income or less to be considered affordable housing. The agency has included special provisions for rural housing and prefabricated housing communities. In rural communities, affordable housing must qualify residents who earn 100% of the median income in the area.

Fewer offers, little capital at market rate

Now that we know what the 2021 mandate for GSEs will be, the next question is, how will these new caps affect multi-family loans?

Marcus & Millichap believe there could be fewer transactions in 2021. He expects wider spreads, opening up the market and making insurance companies, banks, and mortgage-backed securities lenders ( CMBS) more competitive. He thinks these lenders could be particularly competitive on better-quality products with a loan-to-value ratio of up to 70%, as fewer banks are playing in the $ 50 million-plus space.

Marcus & Millichap predicts that GSEs will likely accelerate the purchase of low balance loans, affordable housing products and housing tax credits for low income people.

Capital for housing at market prices could become scarce by the end of the year. For this reason, Marcus & Millichap recommends borrowers who wish to refinance a high-end home to begin the process at the start of the year.

With deals at 60% AMI or less, Marcus & Millichap says investors can have more leeway with timing. He notes that the FHFA has considered over-the-top offers that fulfill its affordable housing mission in the past and will likely do so again.


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