Fannie Mae takes charge of rental affordability on the borrower’s side
“We think supporting tenants is crucial, especially at this time, given the importance of the home to everyone – not just a home you own, but a home you rent, a home you believe is safe, but also affordable. We think this is a great time for us to help get these borrowers to maintain these rent levels for a longer period.
Levin explained the transaction-to-transaction incentives. Fannie manages all of her multi-family loans through an affordability estimator, which allows her to manage her FHFA mission goals. Fannie will determine how many units of this property will meet target affordability levels against the MAI. If at least 20% of the units in the building meet the MAI’s 80% target affordability level, Fannie will typically notify lenders if a deal qualifies. These lenders, in turn, will encourage the borrower to keep these properties affordable over the life of the loan – if all parties agree, then Fannie offers a loan at a more competitive price for the borrower.
One of the main objectives of this program is to preserve and expand the national stock of “affordable natural housing”. While there are few clear estimates of how much of this stock is still in the market, Levin noted that these units are under intense pressure as the growth in rental prices far exceeds income. Where traditional solutions have revolved around government tenant sponsorship, or a voucher system, this incentive addresses the problem by targeting the borrower and making an economic case for keeping certain units affordable.
Since the incentive targets units that are already affordable, Levin expects this will not create significant internal quality mismatches between units. To be eligible for the incentive, affordable units must cover the full range of unit types spread across the property, corresponding to the number of one, two and three bedroom units in proportion to the entire property. the property. In addition, the agreement comes with ongoing inspection protocols to ensure borrowers maintain their agreement from an income and rent perspective.
Levin pointed out that this incentive is really a first dive into the “mainstream” side of their affordability efforts. This reflects, however, other efforts of Fannie Mae grow as an “ESG” company, offering products and services that are part of a positive environmental, social and governance framework. While this effort is still in its early stages, Levin hopes mortgage industry stakeholders will join them in trying to address America’s growing affordability problem.