The government-sponsored enterprises (GSEs) Fannie Mae (OTCMKTS: FNMA) and Freddie Mac (OTCMKTS: FMCC) are reportedly preparing tougher rules for multifamily property lenders and brokers.
According to a Wall Street Journal report sourced from unnamed “people familiar with the preliminary plans,” the new rules would require lenders to independently verify financial information related to borrowers for apartment complexes and other multifamily properties. Lenders would also have stricter requirements in verifying if a property borrower’s source of funding and access to cash.
If the rules go into effect, lenders will need to complete due diligence on the appraised value of a property by evaluating its financial performance. The new rules would follow a rise in fraud in multifamily loan applications that were revealed after elevated interest rates created declines in commercial property prices.
Fannie Mae and Freddie Mac together owned or guaranteed nearly 40% of the $2.2 trillion in multifamily mortgage debt as of September 2023. The GSEs and their regulator, the Federal Housing Finance Agency, declined to comment on the report.
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