FHFA Extends COVID-19 Multifamily Forbearance Indefinitely

The Federal Housing Finance Agency announced that Fannie Mae and Freddie Mac will continue to offer COVID-19 forbearance to qualifying multifamily property owners as needed, subject to the continued tenant protections FHFA has imposed during the pandemic. 

This is the fourth extension of the programs, which were set to expire Sept. 30, 2021. On October 1, 2021, FHFA will allow the Enterprises to continue offering COVID-19 forbearance to qualified multifamily owners, unless otherwise instructed by FHFA.

“Given the uncertain nature of this pandemic, FHFA is taking further action to protect renters, property owners, and the mortgage market,” said Acting Director Sandra L. Thompson.

Guidelines to Enter Modified Forbearance

Property owners with Government Sponsored Enterprise (GSE)-backed multifamily mortgages can enter a new or, if qualified, modified forbearance if they experience a financial hardship due to the COVID-19 emergency. 

Property owners who enter into a new or modified forbearance agreement must:

• Inform tenants in writing about tenant protections available during the property owner’s forbearance and repayment periods; and
• Agree not to evict tenants solely for the nonpayment of rent while the property is in forbearance.
• Additional tenant protections apply during the repayment periods. These protections include:
• Giving tenants at least a 30-day notice to vacate;
• Not charging tenants late fees or penalties for nonpayment of rent; and
• Allowing tenant flexibility in the repayment of back-rent over time, and not necessarily in a lump sum.

FHFA may extend or sunset its policies based on updated data and the impacts of COVID-19.

FHFA Issues Notice of Proposed Rulemaking

Separately, on Sept. 16, the FHFA issued a notice of proposed rulemaking to amend the Fannie Mae and Freddie Mac capital rules that were issued in December 2020. Specifically, the proposed rule would:

• Replace the fixed PLBA equal to 1.5 percent of an Enterprise’s adjusted total assets with a dynamic PLBA equal to 50 percent of the Enterprise’s stability capital buffer;
• replace the prudential floor of 10 percent on the risk weight assigned to any retained CRT exposure with a prudential floor of 5 percent on the risk weight assigned to any retained CRT exposure; and
• remove the requirement that an Enterprise must apply an overall effectiveness adjustment to its retained CRT (credit risk transfer) exposures in accordance with the ERCF’s securitization framework.

The new proposal would reduce the total retained capital held by the Enterprises to approximately three percent from four percent that is in the current rule. The result would reduce the combined capital held by the Enterprises from $294 billion to $220 billion. Importantly, the proposal also recognizes the value and importance in credit risk transfer and provides greater capital relief by removing the effectiveness adjustment to CRT exposures.