New agency credit limits could help the small balance market


This year the regulator did a few changes on Fannie Mae and Freddie Mac’s credit limits for the new year. The FHFA has set a multi-family loan cap of $ 70 billion for the two housing associations in 2021, giving them $ 140 billion combined lending, and it has an affordable home loan mandate of 37 .5% increased to 50% this year.

These new requirements could pose challenges for large, market-priced deals. “Many larger sellers are looking at the new caps and affordability mandates and wondering how they will do their numbers in 2021,” Pat Jackson, CEO and founder of Sabal Capital, told

The reduced availability of credit is the most significant change, according to Jackson, as it reduces credit capacity between the two agencies by $ 20 billion. “The cap has dropped from $ 80 billion to $ 70 billion. That’s $ 10 billion less available capital in 2021 than in 2020, ”says Jackson. “There are $ 20 billion fewer credit options available between Freddie and Fannie next year. That’s the real story. If you add the additional affordability calculation, the availability of agency products for the multi-family marketplace could be lower. That is an important point.”

The FHFA increased the mandate on affordability, but also changed the definition of affordable housing. “The calculation of affordability has also changed,” says Jackson. “This makes it easier for the agencies to meet the 50% requirement in some ways. However, something that is clearly in line with the market price will not qualify. That has to be the other 50%. “

Ultimately, this could be good news for small borrowers and medium-sized multi-family borrowers, the two groups that Sabal is aiming for. “The smaller balance sheet market was historically underserved,” says Jackson. Now that the pond has gotten a little smaller, we think people will be more disregarding the bigger deals. We say let them do it. “

In addition, Sabal has a CMBS product that helps catch borrowers who fall through the agencies. “A really robust CMBS platform is also important. If we’re serving a client and they can’t get the loan through the agencies because the cap has dropped, they don’t have to look elsewhere, ”says Jackson. “We’ll turn you around and give you an agency-independent solution. That’s an important difference.”


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