Expanded obligations for renters would disincentivize participation in multifamily programs
The Mortgage Bankers Association is urging the Federal Housing Finance Agency to refrain from enacting additional obligations for renters that may disincentivize them from participating in GSE-backed multifamily programs.
MBA responded to the FHFA’s request for information (RFI) on tenant protections for multifamily properties backed by its regulated entities – Fannie Mae, Freddie Mac, and the Federal Home Loan Bank System.
Increased obligations for renters would make enterprise loans “unattractive, expensive, more cumbersome and intrusive” compared to other financing sources, given the cost of staffing and systems required to monitor and enforce these new requirements, according to MBA. Additionally, any new changes would only apply to specific properties with GSE-backed loans as opposed to all multifamily properties.
Read more: FHFA asks for input on expanding multifamily tenant protections
In a statement, Mike Flood, SVP of commercial/multifamily policy and member engagement at MBA, outlined members’ concerns with including additional enhancements to the GSE multifamily program.
“Lenders and servicers do not have a direct connection with tenants or the ability to monitor and report on the landlord/tenant relationship,” Flood wrote in a letter addressed to FHFA director Sandra Thompson. “The loan is serviced on behalf of the borrower. The landlord/tenant relationship is sacrosanct and unrelated to commercial mortgage servicing.
“Involving the mortgage lender and/or servicer and attaching any additional enhancements for tenants to an enterprise guaranteed mortgage is not a workable or lasting solution as the loan will pay off, often in five years or less, and those covenants and agreements will terminate with the mortgage. Furthermore, any enhancement would be within a contract that the renter never reviewed, provided input on, or signed.
“Enacting new or expanded obligations, like rent control, would disincentivize participation in the enterprise multifamily programs or in the overall production of affordable housing. The most effective way to help renters in need is to increase the supply of affordable housing by fully funding successful, proven programs like Section 8, Low-Income Housing Tax Credits and more.”
MBA offered several alternatives to rent control for the FHFA to consider, including:
- Expansion of LIHTC
- Increase Housing Credit allocations by restoring the 12.5% cap increase that expired in 2021 and further increasing resources by 50% to help meet the vast and growing need for affordable housing.
- Allow states to maximize affordable housing production and preservation by lowering the threshold of Private Activity Bond financing — from 50% to 25% — required to trigger the maximum amount of 4%
- Yes in My Back Yard or “YIMBY” legislation which provides the federal government tools to encourage localities to remove harmful land use regulations; and
- Increased funding for Housing Choice Vouchers.
“The enterprise multifamily programs are critical to the health of the nation’s rental housing market and the supply of housing for low-income individuals and families,” Flood said. “It is important to ensure we have a liquid marketplace with ample supply and demand, as we know supply is severely lagging. We urge FHFA to refrain from enacting additional enhancements for tenants that may disincentivize participation in the enterprise program.”
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