What’s Changed in Freddie Mac’s New Multifamily Forward Commitment Allowance?

The goal is to increase the number of workforce and affordable housing units being built.

Freddie Mac declared that it would expand lending for recently built or extensively renovated multifamily homes.

According to the statement, “the company will take advantage of the FHFA flexibility provided that allows for greater utilization of forward commitments, which are agreements to purchase loans at a later date with specific financing terms locked in today.” The agreements give construction lenders and home developers more assurance by reducing the risks they encounter when carrying out complicated multifamily acquisitions in unstable markets. In its Equitable Housing Finance Plan, Freddie Mac suggested using forward commitments more frequently.

Any firm, particularly in the commercial real estate industry, must constantly deal with uncertainty. The circumstance of increased risks make it more challenging for a business to plan and secure appropriate finance.

The issue is practically impossible to solve when inflation is high as building prices are rising quickly, and borrowing rates are being continuously pushed higher by the Federal Reserve. There are really too many unknowns. The problem is much more challenging if the project is for low income housing. There is little room for planning to cover future costs when there is a strict cap on the maximum amount that rentals can be.

Future obligations, according to the Federal Housing Finance Agency (FHFA), were to stay below Freddie Mac’s annual product cap of $78 billion for 2022. However, the FHFA has already announced that $3 billion in 2022—or just shy of 4%—would be excluded from the cap. The $500 million ceiling on forward commitments for properties not covered by the Low-Income Housing Tax Credit program is now being lifted by FHFA.

Since September 2021, the Biden administration has talked about ways to enhance the availability of affordable housing. The strategy calls for federal agencies to increase the supply of high-quality, reasonably priced rental homes by resuming a collaboration between the Department of Treasury’s Federal Financing Bank and the Department of HUD Risk Sharing Program, as stated in a previous GlobeSt.com report.

To “improve the flexibility of state, local, and tribal governments to employ American Rescue Plan (ARP) funds to boost the supply of affordable housing in their areas,” the Treasury Department published “new instructions” in July 2022.

According to the Treasury, it has “encouraged” state and local governments to use some of the $350 billion in State and Local Fiscal Recovery Funds (SLFRF) to create and maintain affordable housing units. The continuous obsolescence of older, more affordable housing stock makes it harder to overcome the housing gap, experts have repeatedly told GlobeSt.com.

The SVN Vanguard team can help with your Multifamily Real Estate needs. We can help you find the ideal multifamily property for sale or lease. Interested in discussing a sale leaseback? Contact us.

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