By John Nelson
Fannie Mae and Freddie Mac are adopting a more pro-business approach when it comes to closing multifamily loans in 2025 than in recent years, when sources say they were more selective. The two government-sponsored enterprises (GSEs) combined to produce 33 percent more multifamily loans in first-quarter 2025 compared with first-quarter 2024.
“There is definitely a ‘volume on’ mindset at both shops,” says Landon Litty, director of agency sales at BWE. “This is a real positive for borrowers.”
For Fannie Mae, the volume of multifamily loans totaled $11.8 billion in the first quarter of 2025, compared with $10.1 billion in the first quarter of 2024. Meanwhile, Freddie Mac produced approximately $15 billion in multifamily loans in the first quarter, financing around 144,000 rental units, well above the approximately $10 billion produced in first-quarter 2024.
“The first quarter of 2025 has been dynamic, with real-time adjustments to meet market needs while maintaining a focus on soundness,” says a spokesperson at Freddie Mac Multifamily.
Other sources attest that the GSEs are focusing on their sponsors more so than in previous years. T.J. Edwards, chief production officer for the multifamily finance division at Walker & Dunlop, says the agencies are pro–actively vetting first-time borrowers while still emphasizing deal execution.
“There are updated due diligence requirements for first-time and limited-experience borrowers,” says Edwards.
“The ‘know your customer’ level of underwriting that’s going on with the agencies is front of mind for anyone that is doing business with them,” adds Jeff Erxleben, president of debt and equity at Northmarq. “That little bit of extra diligence is a good thing at the end of the day.”
The GSEs’ conservator, the Federal Housing Finance Agency (FHFA), telegraphed this renewed vigor in multifamily loan production when it raised the multifamily loan purchase caps for Fannie Mae and Freddie Mac this past November. The two GSEs each have caps of $73 billion, or $146 billion combined, for the year, which is a 4 percent increase from the 2024 caps of $70 billion.
The FHFA began using lending caps for Fannie Mae and Freddie Mac in 2014 that put an upper limit on their loans for market-rate apartment communities in order to reduce the agencies’ exposure. However, the FHFA did have a list of exclusions for certain loans, namely those for affordable housing and green energy, that did not count against the cap, giving the agencies a long leash in those categories.
“The agencies are under directive from the regulator to be commercially relevant and active in the marketplace,” says Litty. “Through the first part of 2025, both agencies appear extremely motivated to deploy as much of their $73 billion cap as possible.”
In 2024, Freddie Mac used up roughly 94 percent of its allowed cap while Fannie Mae utilized about 79 percent.
“We aim to optimize capital under our lending cap each and every year, and 2025 is no different,” says the Freddie Mac Multifamily spokesperson. “We are full steam ahead across all of our business lines and specialty products.”
Erxleben says that the FHFA raising the lending caps shows recognition of the agencies as a “market maker” for the U.S. multifamily sector.
“The FHFA increasing the caps is an affirmation that Freddie Mac and Fannie Mae, as they always have been, will be a steady market provider of capital for the multifamily industry,” says Erxleben, adding that the two agencies regularly account for more than 40 percent of the market share for U.S. multifamily mortgages.
“The cap doesn’t change the business for the agencies, but it affirms that they are going to continue to provide liquidity to the multifamily market, which is a good thing for the industry and for borrowers,” he says.
Competitive Underwriting
Fannie Mae and Freddie Mac aren’t the only games in town for multifamily borrowers. According to the Mortgage Bankers Association (MBA), multifamily loans across the board are up 39 percent in first-quarter 2025 compared to a year ago, with big leaps coming from banks, life insurance companies and commercial mortgage-backed securities (CMBS) lenders. Also, multifamily borrowers that need to convert an old hotel or office building into a new apartment community have access to commercial property assessed clean energy (C-PACE) financing.
Needless to say, the agencies don’t lack for competition, thus they are making their loan offerings as attractive as they can manage.
“We have seen some very competitive quotes from the two agencies,” says Ian Monk, head of conventional production at Lument.
Underpinning the entire framework of the multifamily lending arena are interest rates, which remain elevated since the Federal Reserve began increasing the federal funds rate in 2022. At its May meeting, the Federal Open Markets Committee (FOMC) decided to keep the federal funds rate at a range of 4.25 to 4.5 percent.
Similarly, the secured overnight financing rate (SOFR) is currently at 4.35 percent, a far cry from its rate of near zero in 2020 and 2021. And for longer term loans, the 10-year Treasury yield is currently at 4.45 percent, up significantly from trending below 2 percent between summer 2019 and spring 2022.
“A lot of borrowers are having their moment of reckoning where they realize that the interest rates they are seeing now aren’t going anywhere, and the rates they saw back in 2020 and 2021 are never coming back,” says Monk.
To help secure business in this era of “higher for longer” interest rates, the GSEs are offering interest rate buydown options, where multifamily borrowers can buy their interest rate down by up to 200 basis points to maximize loan proceeds. Additionally, the agencies are reducing their spreads during the underwriting process.
“Both agencies have lowered their interest rate spreads to historically low levels,” says Litty. “Due to lower leverage and/or an interest rate buydowns, we have rate-locked many deals with sub-100 basis point spreads.”
Sources say that Fannie Mae and Freddie Mac are also offering attractive pre-payment options on the back end of their fixed-rate loan products, as well as full-term, interest-only payments and 35-year amortization schedules, which is are above its their commonplace 30-year schedules.
“We are seeing both Fannie Mae and Freddie Mac utilize 35-year amortization more frequently,” says Troy Marek, head of real estate capital markets for Regions Bank. “Historically that would have been used around ‘capital A’ affordable deals, but it’s also being applied a little more frequently in the conventional space with the right sponsor.”
Marek adds that short-term financing, namely five-year loans, continue to be a popular request for his firm’s agency borrowers.
“As a point of reference, about 40 to 45 percent of our loans currently are shorter-term debt,” he says. “Longer-term debt will become an increased choice as longer-term rates come down.”
Edwards concurs, saying that roughly 50 percent of Walker & Dunlop’s agency loan volume in 2024 was structured with a five-year term.
“And 2025 year-to-date, that remains the same,” says Edwards, adding that the company is seeing a 6 percent uptick in its 10-year, fixed-rate agency loan volume.
Fannie Mae and Freddie Mac are shopping their 10-year loan products much more aggressively this year. While speaking to a crowd at the recent InterFace Carolinas Multifamily Conference in Charlotte, Lee McNeer, executive director at PGIM Real Estate, said that 80 percent of Freddie Mac’s multifamily loan production in 2022 comprised 10-year loans. In 2024, that level fell to 33 percent.
To get borrowers on board for longer-term debt, sources say that agencies have modified and loosened some of their underwriting standards.
“We’ve seen some very good 10-year quotes and great seven-year quotes,” says Monk. “The agencies want to quote longer-term loans.”
“After doing an increased number of shorter-term loans in recent years, both agencies are looking to have more of a balanced mix of loan terms going forward,” adds Litty.
Locking It In
Fixed interest rates remain the “flavor of the day,” according to Monk. Borrowers are seeking to take interest rate risk off the table, and the agencies are obliging with their loan products. Several sources cited Freddie Mac’s Index Lock program as a popular option, as it allows borrowers to lock in the Treasury index (i.e. the 10-year Treasury yield in most instances) during the underwriting process.
“We’ve been very busy with Freddie Mac because of their Index Lock program,” says Monk. “It gives that borrower a little more comfort knowing that when they lock that index in, that’s what they’ll have, assuming that they close by the timeline that everyone agrees to.”
“Certainty of execution is a major selling point for Freddie Mac borrowers and lenders, who can lock in the Treasury index during the quote or underwriting process with an Index Lock,” says a Freddie Mac Multifamily spokesperson. “Combined with our spread hold policy, this effectively allows borrowers to lock in their rate and brings certainty to deals in all types of market environments.”
Fannie Mae has a similar program called Streamlined Rate Lock (SRL), which Litty says is gaining traction with borrowers due to its expedited nature.
“Fannie Mae’s SRL program can allow clients to lock rates more quickly and in a similar timeframe to life company executions,” says Litty.
The agencies are also relaxing their parameters for financing properties during lease-up, a period when borrowers are looking to refinance their construction loan while the property is not yet stabilized from an occupancy standpoint. This option could also appeal to borrowers that have recently taken on the lease-up risk by purchasing communities while still under construction or freshly delivered.
For those borrowers, Fannie Mae has its Near-Stabilization program and Freddie Mac has its suite of Lease-Up Loan products.
“Both agencies are looking to enhance their Lease-Up or Near-Stabilization programs, capturing deals a little bit earlier in the property’s lease-up phase,” says Marek. “This allows borrowers to secure agency loans while their properties are at slightly lower occupancy than historically required for an agency loan.”
“Fannie Mae, in particular, has been active with its Near-Stabilization product, which allows both a rate lock and closing provided there is a clear path to stabilization within 120 to 150 days,” adds Litty.
Making the Most of Opportunities
In early April, on news that the federal government would be enacting tariffs with its trade partners either wholesale or for specific commodities, the 10-year Treasury yield dipped below 3.9 percent. When that occurred, multifamily borrowers pounced on the opportunity for the ensuing week.
“Borrowers took advantage of the opportunity to lock in rates below quoted expectations,” says Edwards. “This level of volatility can create opportunities but it’s not sustainable over the long term.”
“Anytime that talk of tariffs has ramped up, there has been a direct impact on Treasuries,” adds Monk.
Erxleben says that the key message to Northmarq’s multifamily borrowers in recent months has been for his clients to be able to capitalize on opportunities when the Treasury rates drop.
“The guidance across the agencies and to our borrowers is to be in the position to take advantage of the dips,” says Erxleben. “There seems to be volatile times daily, though that volatility has not negatively impacted inbound volume flows. Those volume flows have remained very strong.”
Another opportunity that agency lenders are signaling to their borrowers in recent months is acquisitions. U.S. apartment sales in 2024 increased by 22 percent year-over-year to $146 billion, according to data from MSCI Real Capital Analytics. Through the first quarter, multifamily sales totaled $30 billion, which is up 7 percent year-over-year.
Monk says that Lument’s portfolio of agency loans is moving from an 80/20 split between refinancings and acquisition loans to 70/30 or 65/35 over the past six to eight months. Litty says that BWE is experiencing a similar dynamic.
“We are seeing an increased number of [loan] assumption requests related to acquisitions of assets that are secured by first mortgage agency debt originated in the 2020 to 2022 timeframe in a lower interest rate environment,” says Litty.
The MBA reports that approximately $1.6 trillion in commercial real estate and multifamily debt is set to mature over the course of this year and 2026, with $957 billion maturing in 2025 alone. This is forcing a tough decision for many borrowers: refinance at a higher interest rate or sell. And many borrowers have run out of extension options on the agency debt they secured in a historically low interest ratelow-interest rate environment (pre-COVID to before early 2022).
“A lot of borrowers have no choice. They have to transact, though they might not necessarily want to,” says Monk.
Edwards adds that now is an opportune time for multifamily investors as they can purchase Class A assets at a “meaningful discount to replacement cost,” which allows borrowers to secure the assets’ value over the long term.
Changes on the Horizon?
RealPage reports that tenant demand remains robust for multifamily as 138,302 units were absorbed nationally in first-quarter 2025, which outpaced deliveries (116,092 market-rate apartments) — a record first quarter, according to RealPage’s research. Additionally, the Texas-based research firm says that the “supply wave is cresting” for the U.S. multifamily sector.
Outside of a few overbuilt pockets in some of the nation’s top submarkets, the health of the multifamily sector is generally “in a good spot,” says Monk.
“There’s a consistent need for affordable housing in this country, and I don’t mean income-restricted — just typical workforce housing that’s attainable for renters,” says Monk. “It’s a very big focus for the agencies, and for Lument, these past few years.”
“The forward-looking outlook for multifamily remains pretty positive, driven by robust demand for housing,” adds Erxleben. “There are some problem areas as they relate to existing loans, but that’s more driven by the capitalization of the property and less driven by the property performance fundamentals.”
As of first-quarter 2025, Fannie Mae and Freddie Mac have reported slight increases in their delinquency rates for multifamily loans. Fannie Mae’s delinquency rate increased to 0.63 percent, and Freddie Mac’s delinquency rate rose to 0.46 percent. These levels are among the highest seen since the recession in the early 1990s. Typically the GSEs’ multifamily loans fall in the 0.1 to 0.2 percent range during stable times.
Edwards points to the U.S. apartment market’s current 55 percent renewal rate as another indicator in the sector’s health. Prior to the pandemic, the renewal rate hovered around 50.7 percent, according to RealPage. That figure peaked in early 2022 at above 58 percent.
While Fannie Mae and Freddie Mac remain an important capital source for multifamily borrowers, they are titans in the single-family home mortgage market. Combined the GSEs hold or guarantee approximately $7.3 trillion in mortgages as of year-end 2024.
Recent comments by President Donald Trump have suggested that a shake-up may be forthcoming in the structure of the two agencies. Writing on social media platform Truth Social, Trump stated, “Our great Mortgage Agencies, Fannie Mae and Freddie Mac, provide a vital service to our Nation by helping hardworking Americans reach the American Dream — Home Ownership. I am working on TAKING THESE AMAZING COMPANIES PUBLIC, but I want to be clear, the U.S. Government will keep its implicit GUARANTEES.”
Privatization of Fannie Mae and Freddie Mac is nothing new as past presidents have spoken about reducing the government’s role in the U.S. housing market via the two agencies.
“While [the agencies are] in conservatorship, there will always be the debate on if, when and how they could be privatized,” says Edwards.
Components of privatization structures discussed in the past have centered on the agencies exiting FHFA conservatorship, which they’ve been beholden to since the aftermath of the housing crisis in 2008, as well as being fully autonomous, publicly traded companies.
Whether or not the oversight of the agencies changes, Erxleben says that their staffs have always been professional to work with and efficient in their loan processes.
“As it relates to efficiencies within the multifamily group, the teams at both agencies work their tails off,” says Erxleben. “As far as the future goes and what happens with privatization — or doesn’t happen with privatization — I’m sure those teams will continue to perform at the ultra-high level that they always have.”
“We are big supporters of the agencies and their future in the space,” adds Monk. “They are vital to our industry.”
This article originally appeared in the June issue of Southeast Real Estate Business.