Community Developments Investments (March 2017)
New Fannie Mae Product Helps in Efforts to Preserve Affordable Housing
Fannie MaeWoodland Towers, in Collinsville, Ill., was preserved with low-income housing tax credits and tax-exempt bonds and has received new rental subsidies from a Section 8 housing assistance program contract.
Bob Simpson, Vice President, Affordable, Green, and Small Loan Business, Fannie Mae
As rents rise and wages stagnate for many American households, preserving the physical condition of properties and affordability for renters is essential. Current market dynamics can make it more profitable to convert properties to serve higher-income tenants, diminishing the existing affordable housing stock. An additional problem is that the new supply of affordable rental housing is not keeping pace with demand.
Fannie Mae has helped provide affordable rental housing to low-income individuals and families for nearly 30 years. The Multifamily Affordable Housing (MAH) business segment is defined as those properties with recorded rent and income restrictions and 20 percent of the units reserved for those earning 50 percent or less of the area median income (AMI);
In partnership with its Delegated Underwriting and Servicing Lenders, Fannie Mae has delivered over $4 billion of MAH financing in 2016, building on the more than $3 billion in new production in 2015.
Innovation has been a key component of Fannie Mae’s strategy to meet these challenges and to capture even more of the affordable housing business. Concentrating first on meeting the unique needs of properties with expiring federal low-income housing tax credits (LIHTCs) that will pursue a tenant-in-place rehabilitation through a new allocation of tax credits, Fannie Mae created a new mortgage-backed security (MBS), the MBS as Tax-Exempt Bond Collateral (M.TEB) execution. M.TEB has all the benefits of tax-exempt bonds along with a lower interest rate and significant savings over the life of the loan. Often the borrower uses this execution to take out a bridge loan while the borrower applies for tax credits.
For example, the Woodland Towers apartment complex in Collinsville, Ill., will use
Loans to smaller rental properties play a unique role in the rental housing market and are key to preserving units across the country. Fannie Mae recently expanded small loan underwriting, because small loans tend to be more affordable. The company’s small loan program offers fixed- and variable-rate financing for loans of $3 million or less in most markets, and $5 million or less in eligible higher-cost markets, on smaller rental properties. The company has provided $15.7 billion of liquidity to this market since 2009.
Demographic and economic shifts require that the industry take a multifaceted approach to ensure that existing affordable properties remain available to the growing numbers that need them, while also doing what it can to support the production of new units. This support includes providing green financing solutions and options for both new construction and preservation of affordable rental stock, as well as enhancing the pricing for these types of transactions.
Fannie Mae.Winslow Cross Creek, in Sicklerville, N.J., is a newly constructed Energy Star-certified property financed by
$1.9 million and $2.4 million in construction take-out loans from Fannie Mae.
Fannie Mae continues to maintain a significant market share in affordable rental housing finance by providing permanent take-out financing for acquisition, bridge, or construction loans. These tools and enhancements provide resources in preserving vital affordable rental housing stock. Together with its network of affordable and small loan lenders, Fannie Mae is committed to meeting the challenges of the affordable rental housing market in 2017 and beyond.