What You Need to Know about Fannie Mae Multifamily Financing

The Federal National Mortgage Association, commonly known as Fannie Mae, is a key player in financing multifamily properties. It’s one of the biggest supporters of affordable housing initiatives and facilitates access to capital for multifamily property owners.

Through various loan programs and partnerships, Fannie Mae aims to address the growing demand for rental housing while ensuring affordability and stability in the market. To date, the organization has funded more than 10 million units — that’s 10 million roofs over as many (or more) heads.

As a top producer for Fannie Mae financing for many years, Walker & Dunlop knows the agency’s programs inside and out. Here’s what CRE investors and clients should know about using Fannie Mae to finance a multifamily property and shape the American real estate landscape.

The History of Fannie Mae and Multifamily Financing

Fannie Mae recognized the growing need for affordable rental housing and began expanding to multifamily borrowers. It introduced the Multifamily Mortgage Participation Certificate (MPC) program, which allowed clients to purchase shares in pools of multifamily mortgages.

The Charter Act broadened Fannie Mae's authority. This allowed the agency to purchase and securitize multifamily loans, promoting liquidity in the market and increasing the availability of capital for rental housing.

It has since introduced various programs to encourage affordable housing, including the Affordable Housing Program (AHP) and the DUS (Delegated Underwriting and Servicing) program. Since its inception in 1988, the DUS program has been central to Fannie Mae’s success, helping to streamline the underwriting and approval process for multifamily clients and making it easier for lenders to work with Fannie Mae.

Understanding Fannie Mae’s Multifamily Loans

Under its multifamily loan arm, Fannie Mae offers several types of loans, each with varying guidelines and processes for securing funds.

Here’s a closer look at just a few of Fannie Mae’s offerings:

Affordable Housing Preservation

Building new affordable housing is futile if existing options aren’t also preserved. Fannie Mae offers loans to improve stabilized rental properties with rent and income restrictions.

Eligibility:

• Properties with expiring Low-Income Housing Tax Credit deals
• Refinancing of existing tax-exempt bond deals
• Properties eligible for the Rental Assistance Demonstration (RAD) program
• Properties with HUD Section 8 HAP Contracts
• Additional requirements

Green Financing

Fannie Mae offers incentives to clients creating “greener” properties, such as those with energy and water conservation features. Clients may qualify for lower interest rates on properties with an eligible Green Building Certification or those that invest in Active Design or Resident Services. Learn more about Green Financing.

Rural Development

This permanent loan is designed to construct, acquire, or rehab rural properties via the USDA’s RD 538 program. With backing by the USDA, clients can mitigate loan loss up to 90 percent while enjoying flexible loan terms and amortization.

Eligibility:

• Minimum $6,500 rehab per unit required
• Projected rent capped at 30-percent AMI
• Preservation transactions with rent subsidies
• Additional requirements

Seniors Housing

More seniors aim to “age in place” and live independently, and dedicated senior housing options can help to fill this growing need. Fannie Mae seniors housing loans encompass several property types, including dementia care, assisted living facilities, and independent living complexes.

Eligibility:

• Existing, stabilized, purpose-built Seniors Housing Properties
• Operators with experience in Seniors Housing

Student Housing

With the cost of higher education climbing, affordable student housing is in high demand. A student housing Fannie Mae loan can help address this growing need, provided that 40 percent or more occupants are undergrad or grad students (dedicated student properties have additional considerations).

Eligibility:

• Existing properties that cater to students because of tenancy, design, or location
• Operators with a proven track record in student housing
• Units can be rented on a per-room or per-bed basis
• Cannot be university-owned land

Workforce Housing

Workforce housing loans are Sponsor-Initiated Affordability (SIA) properties that cater to populations making 80 percent or less than the area’s median income (AMI). This loan incentivizes the voluntary creation or preservation of affordable properties.

Eligibility:

• Minimum of 20 percent of units are affordable at 80 percent of AMI
• Applied to existing stabilized conventional properties
• Rent does not exceed 30 percent of AMI for unit size
• Rent and income restrictions
• Additional requirements

Want more? Here’s a complete list of Fannie Mae loans for multifamily properties.

Benefits of Fannie Mae Multifamily Financing

Many commercial real estate participants are attracted to Fannie Mae Multifamily Financing options for several reasons, including:

1. Competitive Rates: Fannie Mae’s unique risk-sharing model spreads the risk across its network of market participants, which results in reduced costs for clients.
2. Flexibility: Loan conditions aren’t one-size-fits-all. Flexible terms and options are available for various property types and situations, including fixed or variable interest rates, loan durations, and supplemental options.
3. Accessibility: A national network of DUS lenders makes obtaining Fannie Mae loans convenient.
4. Easier Qualification: With Fannie Mae absorbing some of the risks, clients may find it easier to qualify for these loans.
5. Improved Liquidity: Fannie Mae ensures lenders have the funds to issue new loans, contributing to a healthy real estate market.
6. Streamlined Rate Lock (SRL) option: This option allows clients to effectively manage interest rate risk, while still keeping flexibility and speed to rate lock in mind. Available on all fixed-rate loans for the acquisition or refinance of multifamily properties, it’s a benefit clients especially enjoy in times of market volatility.
7. Availability of supplemental financing

The DUS program, in particular, works because the interests of the borrower, lender, investor, and Fannie Mae are all aligned.

The Future of Fannie Mae Multifamily Financing

Ongoing inflation has sparked new interest in affordable housing as the average consumer’s buying power declines. Fannie Mae closed 2022 with a record $69 billion in volume, underscoring the role it plays in supporting the multifamily market. Fannie Mae will continue to play a pivotal role in expanding access to capital that can create affordable housing facilities for various needs.

How Walker & Dunlop Can Help with Fannie Mae Lending

Fannie Mae's multifamily financing offerings create a wealth of opportunities for commercial real estate clients and the families they serve. With greater access to capital, clients can help to shape urban landscapes and contribute to the greater good of putting more people under roofs.

With experience as a DUS lender since the program’s inception in 1988, we work tenaciously with Fannie Mae to offer the best advice and lending options to our clients. For many years, Walker & Dunlop has been a top Fannie Mae producer, and our stellar record continues to shine. Walker & Dunlop was the #1 DUS lender by volume in 2022 and has been the #1 lender 8 out of the last 11 years. We’re continuing to help our clients access funding to move multifamily projects forward.

Ready to leverage Fannie Mae Multifamily Financing for your next commercial real estate venture? Our team of dedicated experts is prepared to guide you through the intricacies of Fannie Mae's offerings. Connect with our team today.