Wheeling WV property management
Published on: Saturday, December 5th, 2015
Wheeling WV property management less than halfway through 2015, Fannie Mae and Freddie Mac are approaching their $30 billion annual lending limit. Because these government-sponsored entities are by far the biggest multifamily lenders, reaching the limit so early in the year would alter the industry’s capital sources for the rest of 2015 and potentially early 2016. The limit was established by the Federal Housing Finance Agency in 2013 to limit GSE exposure to multifamily lending and allow private capital to expand their market share.
As of April 2015, Fannie Mae led new multifamily loan production at $14.9 billion, while Freddie Mac registered new volume of $14.3 billion. Remarkably, these volumes are up 231% for Fannie Mae and 266% for Freddie Mae during the same period in 2014. At this rate, both GSEs would reach their limit for 2015 by the end of 3rd quarter.
Several factors are contributing to the increase in multifamily lending. Structurally, more overall demand for apartment units and lower interest rates are primary culprits. Another factor is that the GSEs, which also approached their lending limits at the end of 2014, delayed some of last year’s new business until January 2015.
In order to ease new volume, both agencies have instated an interest rate hike of around 50 basis points and have further tightened lending standards, according to National Real Estate Investor. Currently, rates for conventional deals with Fannie Mae and Freddie Mac fall between 4.0% and 4.5%.
However, as affordable housing remains a focus for the FHFA, the governing agency recently revised exclusions to the production limit. Specifically, affordable definitions of area median income and how the agency accounts for loans with properties having affordable components were loosened to ensure liquidity in the affordable market. Given these exceptions, recent estimates indicate this could lift total lending beyond $40 billion, according to Bloomberg.
Based on most recent data available, it is too early to tell if these actions are slowing deals for new market-rate apartments from the agencies. Nonetheless, the pace at which banks continue to gain market share is expected to accelerate through the end of the year.
According to data from the Federal Reserve, at the end of 2014, federal agencies owned 41.5% of multifamily loan balances, while banks and ABS accounted for 32.9% and 7.4%, respectively.