The Federal Housing Finance Agency (FHFA) issued a final rule on Dec. 14 that sets benchmark levels for Fannie Mae and Freddie Mac for 2023 and 2024 multifamily housing targets. Sponsored Enterprises (GSEs). By setting goals that GSEs must meet when purchasing mortgages, FHFA encourages GSEs to provide low- and very low-income households with greater access to affordable housing. The benchmark uses a new percentage methodology for purchasing CSEs’ annual multifamily loans.
How is this different from previous years?
The percentages for each category are shown in the table below.
As explained in the August notes from Novogradak’s post, in December 2021, the FHFA set multifamily housing goals for 2022 based on the total number of affordable multifamily homes financed by mortgage loans purchased by the GSEs each year. In August 2022, FHFA published a proposed rule for the revised goals—the 2023-2024 goals instead requiring that the percentage of mortgage-financed affordable units purchased by GSEs each year meet or exceed the affordability benchmark.
Additionally, by setting a one-year benchmark for 2022 due to market volatility following the COVID-19 pandemic, FHFA was able to use more relevant data for 2023 and 2024, which better reflects the ever-changing market. In a FHFA press release, Sandra L. Thompson, the FHFA director, said the new benchmark levels would allow multifamily housing targets to be more responsive to market conditions, thereby allowing the GSEs to meet multifamily housing requirements throughout the year.
The latest FHFA news and investments
The release of FHFA’s final GSE multifamily housing goals follows other policy announcements by FHFA to further support affordable housing. In September 2021, FHFA increased the annual low-income housing tax credit (LIHTC) capital investment limit from $500 million to $850 million for each of Fannie Mae and Freddie Mac, for a total of $1.7 billion. In addition, FHFA announced that the portion of GSE LIHTC capital investments required for mission-related investments increased from 40% of $200 million to 50% or $425 million. These steps contribute to the White House Housing Action Plan, which outlines the efforts of the US Department of the Treasury, the US Department of Housing and Urban Development and the FHFA’s goal of increasing the supply of affordable housing by approximately 100,000 homes.
FHFA also released updated 2022-24 market plans for GSEs under the Duty to Service (DTS) program. Under the Housing and Economic Recovery Act of 2008, the GSEs must establish DTS goals that include plans to increase liquidity for mortgage investments that help very low, low, and moderate income households in three underserved markets. These markets include manufactured housing, affordable housing maintenance, and rural housing. Compared to the 2018-2021 plans, this new set of plans includes an increase in LIHTC loans and capital investments in LIHTC properties. These plans emphasize rural areas and new rural and affordable housing preservation goals.
These DTS goals and performance metrics were published in the 2021 Report to Congress. In 2021, Fannie Mae had a DTS target of 42 rural LIHTC investments. Fannie Mae exceeded that goal, with 52 rural LIHTC investments totaling 2,839 units in 2021. Freddie Mac had a DTS loan acquisition goal of 42,000 units for LIHTC debt in the affordable housing preservation market and exceeded that goal by a total of 52,390 units. Freddie Mac also had a target of 15 loan-to-purchase transactions in the rural housing market and exceeded that target with a total of 16 transactions and 1,295 units.
How to stay informed
FHFA will monitor and report the GSEs’ annual performance against these benchmarks and issue guidance on multifamily market trends. Novogradak’s resources on affordable housing include the Low Income Housing Tax Credit Guide and the Novogradak Tax Credit Magazine. For updates on affordable housing trends, register for the Novogradac 2023 Affordable Housing Developers Conference, January 11-12, 2023.