Fannie Mae multifamily earnings increase in stable market

More than 90% of financing directed to low-income housing

Fannie Mae announced its third-quarter financial earnings on Friday, showing its multifamily sector posted solid gains.

Fannie Mae announced a multifamily net interest income of $549 million in the third quarter, up $45 million from the second quarter and up $58 million from the third quarter of 2017.

The company explained this increase was due to a rise in guarantee fee revenue as the multifamily guaranty book grew during the quarter.

Overall, new multifamily business volume increased to $18.2 billion in the third quarter of 2018, up from $14.5 billion in the second quarter this year. Multifamily business volume few a total of $44 billion during the first nine months of 2014. Of this, about 42% counted toward the Federal Housing Finance Agency’s 2018 multifamily volume cap.

The FHFA’s Scorecard put loan production caps on Fannie Mae and Freddie Mac’s multifamily business to further the goal of maintaining multifamily activities while not impeding on the participation of private capital. The cap set for both companies was $35 billion.

However, the FHFA designed exclusions from the cap to support affordable and underserved multifamily segments of the multifamily market, saying these segments are not being adequately served by the private sector. Exclusions include financing for subsidized affordable housing, manufactured housing communities and small multifamily properties, between five and 50 units.

Additional exclusions include financing for affordable properties in rural areas, energy efficiency improvements in Enterprise-financed properties, and market-rate units that are affordable to very low, low and moderate-income tenants in standard, high-cost and very-high cost rental markets.

Fannie Mae enabled financing for a total of 206,000 multifamily units during the third quarter. More than 90% of those were affordable for families earning at or below 120% of the area median income.

Earlier this week, the FHFA announced that, per its preliminary determination, Fannie Mae passed all five of its low-income housing goals for 2017.

And although the company has been focused on lending to low-income households, the multifamily serious delinquency rate improved in the third quarter, dropping to 0.07% as of September 30, 2018. This is down from 0.11% as of December 31, 2017. The company explained this decrease was due mainly to a decrease in delinquent loans subject to forbearance agreements granted to borrowers in the areas affected by the hurricanes in the latter part of 2017.

Overall, the company posted a comprehensive income of $4 billion in the third quarter of 2018, which was primarily driven by the company’s business fundamentals.

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