Late last month, the Federal Housing Finance Agency (FHFA) announced the 2018 GSE lending caps, reducing them from $36.5 billion to $35 billion based on the Agency’s belief that the GSEs 2017 market share was higher than the target it set. The caps are designed to ensure that private capital is not impeded in the multifamily market.
As has been the case in past years, FHFA will exclude loans that serve the affordable and underserved market segments to avoid restricting capital from them. For 2018, FHFA announced two revisions affecting which loans can be excluded from the production cap.
First, it added an extremely high cost market category. Units at rents at or below 120 percent of the area median income, in extremely high cost markets, will be eligible for exclusion from the cap on a pro-rata basis. The areas are to be identified at a later date.
FHFA also raised the standard for green loans that can be made outside the cap to clearly establish that improvements substantively increase energy and water savings. In 2018, to qualify for exclusion, loans that finance energy or water efficiency improvements must provide a 25 percent savings.
NMHC/NAA will be closely monitoring the impact of these changes on the apartment sectors liquidity. NMHC/NAA meets quarterly with FHFA leaders and provides input on the 2018 caps. We will include a discussion of any capital constraints resulting from the 2018 caps and program changes in our next meeting with them.