The Federal Housing Finance Agency reduced the size of the multifamily caps for Fannie Mae and Freddie Mac in 2021, while increasing the share of lending dedicated to mission-driven affordable housing.

Fannie and Freddie will each be able to help lenders finance up to $70 billion of multifamily loans for a total of $140 billion combined in 2021. That’s down from $100 billion each or $200 billion combined in 2020.

The caps will apply to the calendar year only. Last year, the caps applied to a five-quarter period. FHFA Director Mark Calabria was named to his post in April 2019, and he arranged an overhaul of the multifamily caps that became effective Oct. 1 of that year.

Before 2020, the caps were generally set for four-quarter periods and tended to be around $35 billion each, or $70 billion combined. But Calabria’s predecessor appointed under the Obama administration, Mel Watt, allowed exclusions that included green loans used to finance energy- or water-efficient projects. Those excluded loans boosted Fannie and Freddie’s multifamily production to higher levels than the caps historically would have allowed. Calabria removed the exclusions altogether when he raised the caps.

Caps can be adjusted to address changing market conditions, and there are mixed expectations about how well multifamily will perform given the employment stress in some industries due to the pandemic.

“As we continue to address the shortage of affordable housing, especially amid the COVID crisis, FHFA will keep a close eye on the multifamily caps to ensure that they are sufficient and serve to increase the supply of affordable housing but do not crowd out private capital,” said FHFA Director Mark Calabria in a press release.

At least 50% of the multifamily loans have to be used for mission-driven affordable housing next year, up from 37.5% this year. A minimum of 20% of the mortgage volume in this market now must be affordable to residents whose earnings are 60% of the area median income or less.

The definition of mission-driven affordable housing has been further amended so that it’s aligned with Duty-to-Serve regulation and includes special provisions for rural and manufactured housing communities.

Manufactured housing communities must now be owned by residents, nonprofits or governmental entities; or have tenant-pad lease protections to count as mission-driven, affordable housing.

Loans on rural homes in DTS-designated rural areas where residents make 100% of the area median income or less will be counted toward the affordable housing requirement.

The FHFA also recently released its annual performance and accountability report from the Government Accountability Office. The report found that it met its targets for 16 out of 22 or 73% of criteria.

It fell short of its targets in five areas (23%), and lacked enough data to be measured in one area: an employee viewpoint survey it plans to complete in 2021.

Part of the FHFA’s shortfall was due to the lack of a final capital plan. Risk-based supervisory strategies and examination plans for the Federal Home Loan Banks also remain uncompleted, but they are due by the end of January.

In addition, the FHFA fell short in measures related to: delivering quarterly assessments of the enterprises’ performance, turnaround times for responses on items submitted to the agency, and increasing the dollar amount of contracts awarded to minority- and women-owned businesses.

The GAO found no instances of reportable noncompliance with applicable rules and regulations it tested.