FHA and GSE Moves Could Constrain Multifamily Lending

Federal Housing Administration may not be able meet increasing demand for multifamily and health care facility loans this summer when the agency is expected to run out of loan commitment authority.

The Department of Housing and Urban Development requested $5 billion in additional commitment authority. But House and Senate appropriators did not include the $5 billion in a continuing resolution to fund the federal government through September 30. 

The Mortgage Bankers Association and other industry groups also urged Congress to provide the additional $5 billion in commitment authority but the appropriators are under pressure from all sides to spare programs from cuts.

“Failure to provide the additional commitment authority has the potential to cause significant disruptions to financing for apartments, hospitals and health care facilities that serve millions of Americans,” according to a joint letter signed by 12 trade groups.

Meanwhile, the GSE regulator has instructed Fannie Mae and Freddie Mac to cut back on their purchases of multifamily loans by 10% this year.

Federal Housing Finance Agency acting director Edward DeMarco recently told a House panel that the GSEs’ market share of new multifamily originations increased during the financial downturn, but in 2012, Fannie and Freddie’s market returned to a more normal level.

But FHFA wants the GSEs to pull back by 10% in 2013 so private capital can play a larger role in the multifamily market. 

“We expect this reduction will be achieved through some combination of increased pricing, more limited product offerings and tighter overall underwriting standards,” DeMarco testified.

Congress did include a provision that will benefit Rural Housing Service lenders and the communities they serve.

Under the continuing resolution, communities that are currently eligible for RHS-guaranteed single-family loans will continue to be eligible through September 30.

Without this provision, the Department of Agriculture would have to use the most recent 2010 census data to determine eligible RHS areas and over 900 communities would lose eligibility.

The CR provision continues the use of the 2000 census to maintain the status quo.

Article source: http://www.nationalmortgagenews.com/dailybriefing/fha-and-gse-moves-could-constrain-multifamily-lending-1035249-1.html

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