2023 FHFA Multifamily Cap Announcement

The Federal Housing Finance Agency (FHFA)has released their 2023 multifamily volume cap structures for both Fannie Mae and Freddie Mac. The FHFA cap structures aim to preserve ample investment in multifamily, particularly affordable multifamily housing as housing affordability has fallen to its lowest level in over 30 years. This is primarily due to a nationwide increase in rents relative to income. The new cap structures provide numerous benefits to affordable and workforce housing investment as the FHFA has broadened the types of properties that qualify as mission-driven. Notable changes from last year’s cap structure include:

•The removal of the requirement that 25% of the GSEs multifamily business be affordable at 60% AMI, freeing up capacity to finance more lowercase “a "affordable housing.

•Green Loans are now classified as mission-driven for units at or below 80% AMI - This adjustment is up from 60% in 2022 and will allow GSEs to expand their efforts on energy and water conservation.

•Workforce multi-family housing has been included as mission-driven category and will aim to support residents living in proximity to places of employment, schools, and hospitals.

Through the updated FHFA framework, the GSE’s will drive change and commit to addressing the need for affordable housing.

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Market Commentary

Equity market futures have edged higher as Wall Street awaits the remarks of Federal Reserve Chairman Jerome Powell. Mr. Powell’s speech at the Brookings Institution (1:00 PM EST) will center around Fiscal and Monetary Policy and may provide insight into the central banks vision on future interest rate increases. Though stocks have largely been dampened by a rising interest rate environment for most of the year, a slowdown of inflation and hopes that the December Fed meeting will mark a downshift from a 75-basis point increase has provided some respite. Stocks will likely waver in the near term as markets weigh the effect of global events, such as the China anti-lockdown protest, and incoming data surrounding the health of the U.S. economy (see below).

Index rates dropped over 30 basis points across the board following the November 10 release of the October 2022 CPI report. Inflation appears to have slowed since the previous month, and many have been led to believe that the Fed will begin cutting rates earlier in 2023than as previously expected. On the other hand, the 2-Year Treasury has been hovering at rates we haven’t seen since late 2007, and the inverted yield curve (the 10-Year minus the 2-Year) is at its lowest since October 1981 (-0.76). Given the historical significance of these dates, and the fact that bond markets see negative yield curves as a tell-tale sign of recession, investors are eager to see what comes next. Stay on the look-out for these upcoming reports, which will likely impact market sentiment over the next few months:

•Wed 11/30 (10:00 AM) | BLS Job Openings& Labor Turnover

•Thu 12/1 (8:30 AM) | BEA Consumer Spending

•Fri 12/2 (8:30 AM) | BLS Job Gains, Earnings, & Unemployment