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Fannie Mae, Freddie Mac Roll Out New Multifamily Tenant Protection Framework
Fannie Mae and Freddie Mac have introduced a new tenant protection framework for multifamily properties with GSE-backed mortgages, effective from February 28, 2025.
Jordan B. & Han-Gwon Lung
August 30, 2024
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Good morning. Fannie Mae and Freddie Mac have introduced a new tenant protection framework for multifamily properties with GSE-backed mortgages, effective from February 28, 2025.
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Market Snapshot
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Lending Regulations
Fannie Mae and Freddie Mac Announce Tenant Protection Framework
Freddie Mac and Fannie Mae are rolling out new lease standards aimed at bolstering tenant protections for multifamily properties seeking financing.
Enhanced protections: Fannie Mae and Freddie Mac posted a policy framework and FAQ documents this week to provide additional transparency to tenants and to help lenders and borrowers implement these new requirements. The standards, announced by the FHFA in July, will be effective for loans signed on or after February 28, 2025, the protections include:
A five-day grace period for rent payments;
A 30-day notice for rent increases; and
A 30-day notice of a lease expiration.
Timeline: Certain properties, such as manufactured housing, cooperative housing, and short-term leases, are exempt from these requirements. Borrowers have 6 months post-loan closing to integrate these standards into their leases, with full compliance expected within 24 months. Monitoring will be done through regular inspections and reports.
Penalties: Properties failing to meet the new standards within 30 days of a violation notice could face penalties, including a fee equivalent to 20 basis points of the original loan amount. Continued noncompliance may result in default and impact future transactions with government-sponsored enterprises (GSEs).
From the horse’s mouth: “These lease standards seek to extend the reach of common baseline tenant protections,” said Kevin Palmer, Freddie Mac’s head of Multifamily. While many borrowers already meet or exceed these standards, compliance will now be mandatory for all seeking GSE financing.
➥ THE TAKEAWAY
Big picture: This landmark announcement ushers in a new era of tenant protections in federally supported housing. The new rules will require stricter verification and due diligence from lenders, including confirming borrower financials and property valuations. This change may slow down deal activity in the multifamily sector, but stakeholders view it as necessary.
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✍️ Editor’s Picks
Bulls & bears: Seattle-Tacoma-Bellevue, WA is the leading bull market in the nation for CRE, boasting low distress levels and strong investor confidence.
Increase equity raised: Agora simplifies fundraising by equipping you with the essential tools to engage potential investors effectively and improve investor conversion. (sponsored)
St. Pete's pause: St. Pete Beach is considering pausing commercial development for a year to review a more comprehensive plan, excluding residential projects.
Keeping things honest: The SEC now requires monthly reports on investment fund holdings, with reports due within 30 days, enhancing transparency in an otherwise opaque industry.
Economic rebound: The US economy grew at a 3% annual pace in Q2 with strong consumer spending and 7.5% more business investments.
Texas housing crisis: The Texas housing shortage worsens as the DFW median home price surged nearly 50% since 2020. The Lone Star State now needs 306K more homes to match demand.
Wall Street wins: FinCEN eased AML rules for investment advisors after strong industry opposition. The new regulations focused on monitoring suspicious activities.
🏘️ MULTIFAMILY
The good old days: The $350M LeClaire Courts project got a second wind with a $27M loan. Led by The Habitat Company & Cabrera Capital Partners, the new development will include 700 units and 440 KSF of retail.
Big-time buyer: FPA Multifamily sold a Glendale Heights complex to Oak Residential for $53M, making it the second recent suburban Chicago property sale.
Defying market trends: Seattle's Security Properties acquired a 159-unit complex in Sammamish, WA, marking one of few recent sales in the area.
🏭 Industrial
Chicago boom: Plymouth Industrial REIT (PLYM) partners with Sixth Street Partners, securing $250M for 34 Chicagoland properties, driving robust industrial demand.
Nvidia's ascendancy: Nvidia's (NVDA) Q2 earnings were positive, with profit and sales doubling YoY. Meanwhile, data center sales are up 154%, as share prices slumped 6%.
Boosting the Bay: Alterra recently acquired 3 industrial outdoor storage properties in Tampa Bay, and now owns 8 properties in the bustling region.
🏬 RETAIL
Discount downturn: Dollar General's (DG) shares dropped on a weaker outlook for FY 2024 and missed Q2 earnings, with revenue and net income declining.
Prime shopping: JBL Asset Management bought Ridge Plaza, a South Florida shopping center with a 98.6% occupancy rate, for $22.25M.
Restaurant feast: Four Corners Property Trust (FCPT) acquired 20 Bloomin' Brands (BLMN) restaurants featuring Outback Steakhouse and Carrabba’s for $66.4M.
🏢 OFFICE
Sneaker shuffle: Foot Locker (FL) moved its HQ to St. Petersburg from NYC, but maintains a limited presence in Manhattan with a smaller NYC lease that lasts until 2031.
Prime properties: A recent CBRE analysis reveals that Class-A rents are up by 2.4%, while Class-B and Class-C rents dropped by 1.2% last year.
🏨 HOSPITALITY
Hotel havoc: NYC hotels are facing an existential threat from the Safe Hotels Act, which requires renewed licenses and labor restrictions, sparking an industry uproar.
📈 CHART OF THE DAY
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