Fannie Mae introduces sponsor-initiated affordability incentives for multifamily borrowers

Lower borrowing costs address affordable housing shortage

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Fannie Mae announced that it is offering Sponsor-Initiated Affordability (SIA) incentives for multifamily borrowers through its network of Delegated Underwriting and Servicing (DUS) lenders to lead the market in addressing the nation’s shortage of affordable multifamily housing. The incentives aim to preserve naturally occurring affordable housing (NOAH) and workforce housing by encouraging property owners seeking Fannie Mae financing to agree to rent and income restrictions for residents living in conventional workforce housing.

The SIA incentives, in the form of lower borrowing costs, will be offered to borrowers who agree to preserve or create a minimum of 20 percent of units in a multifamily property affordable to residents earning less than 80 percent of area median income (AMI), adjusted for family size, over the life of a loan with rents not exceeding 30 percent of AMI. The rent and income restrictions will be documented in an affordability agreement and will require annual certification.

“Sponsor-Initiated Affordability pricing incentives help address the shortage of affordable rental housing in America at a time when rent growth is outpacing wages. Nearly half of the families and individuals renting their home spend more than 30 percent of their income on rent and this share continues to rise,” said Rob Levin, Senior Vice President of Multifamily Customer Engagement, Fannie Mae. “SIA allows borrowers to strengthen communities by keeping rents affordable over the life of the loan, and helps ensure renters have more stability when it comes to housing-related expenses.”

With SIA, Fannie Mae is creating new investment opportunities to attract investors interested in social impact. The securities backed by a SIA loan will be disclosed as Multifamily Affordable Housing (MAH) mortgage-backed securities (MBS), eligible to be labeled a “social” bond, and when coupled with green financing, a “sustainable” bond.

Fannie Mae provided $76 billion in financing to support the multifamily market in 2020, the highest volume in the history of its 32-year-old DUS program, and Multifamily Affordable Housing volume rose more than 9 percent to $7.8 billion from $7.2 billion in 2019.