The Federal Housing Finance Agency (FHFA) has announced greater rental housing support from Fannie Mae and Freddie Mac (the GSEs) by raising the multifamily loan purchase cap for each GSE to $73 billion, representing $146 billion in total 2025 multifamily market support and a more than 4% increase from 2024.
The FHFA establishes the caps every year, and they are later included in Appendix A of the GSEs’ Conservatorship Scorecard, a set of annual priorities that they are expected to meet. Just like in 2024, when the cap for each GSE was $70 billion, multifamily loans that finance workforce housing will be excluded from the 2025 limits.
“The 2025 multifamily loan caps reflect the Enterprises’ strong commitment to provide liquidity to make renting a home more affordable,” said FHFA Director Sandra L. Thompson. “Additionally, the ongoing workforce housing exemption will continue to enhance the Enterprises’ ability to support properties that preserve affordable rents, including properties preserved or created through corporate-sponsored affordable housing initiatives.”
Since 2015, the FHFA has set caps on the GSEs’ conventional (market-rate) multifamily businesses to ensure that they continue to support liquidity in the multifamily market, particularly for affordable housing and underserved segments, without crowding out private capital. In order to encourage GSE financing in affordable housing and underserved markets, the FHFA initially excluded several categories of business from the caps. However, in September 2019, the FHFA revised the cap structure to apply to all multifamily business and removed previous exclusions.
For 2024, FHFA set a $70 billion volume cap for each GSE with a 50% mission-driven minimum percentage. Through Q3 of 2024, the GSEs have financed more than $4.5 billion in workforce loans, more than doubling their combined total in 2023.
“The 4% increase in the multifamily loan purchase caps to $73 billion for each GSE is appropriate, given the slightly improved market conditions and lending activity that’s expected next year due to the slow decline in interest rates,” said Mortgage Bankers Association (MBA) President and CEO Bob Broeksmit, CMB. “The cap levels should ensure that the GSEs are a viable option for lenders that finance properties that serve lower-income households and those living in rural areas. We are also supportive of the continued cap exemptions for loans that support workforce housing and appreciate that FHFA will remain flexible should adjustments to the caps and mission-driven requirements be necessary.”
Over the past year, since workforce housing was first exempted from the caps, both Fannie Mae and Freddie Mac have seen encouraging growth in this critical market segment. In addition, FHFA is continuing to require that at least 50% of the GSEs’ multifamily businesses be mission-driven.
The FHFA will continue to monitor the multifamily mortgage market and maintains the ability to raise the caps further if necessary to support liquidity in the market. However, to prevent market disruption, if FHFA determines that the actual size of the 2025 market is smaller than was initially projected, FHFA will not lower the caps.
