How agency lenders are winning multifamily market share through discipline and structural creativity

The conventional wisdom says tighter credit slows lending volume. The agencies proved that wrong last year.

Combined multifamily originations from Fannie Mae and Freddie Mac topped $150 billion, which was up roughly 25% from 2024, but property values are still sitting 28% below their mid-2022 peak. The agencies grew because borrowers trusted the process enough to bring them additional business. With $875 billion in commercial and multifamily mortgage debt scheduled to mature this year, trust has become the most valuable thing a lender can offer.

The credit reset the agencies have put in place over the past two years is real. It’s also permanent. There was a stretch where everybody was racing to compress timelines and claimed, “We can close in 45 days,” or “We can do it in 30.” At some point, the only thing being removed from the process was the time to do a proper analysis and review. That era is over.

Fannie Mae and Freddie Mac have standardized due diligence to a point where borrowers know exactly what will be required of them before ever applying. Underwriting is grounded in what a property is earning. No one is lending into projected rent growth or sizing loans on optimistic five-year assumptions.

That shows up in how the portfolio is performing. Although 13% of all multifamily mortgages will mature this year, only 4% of those held or guaranteed by the agencies will. That contrast tells you something about the structural stability of agency-backed debt, and about why investors buying into agency-backed securities can have real confidence in the underlying credit.

None of that would matter, though, if the agencies were content to sit inside the conventional stabilized multifamily box and wait for deals to come to them. What I’ve been seeing — and what I think the market hasn’t fully appreciated yet — is how much more creative the agencies have become in structuring deals to compete directly with debt funds and life insurance companies.

The agencies are funding near-stabilized projects at occupancy levels where they historically deferred to private lenders. Freddie Mac’s lease-up program lets a borrower fund at current occupancy and capture additional proceeds through an earn-out at first-lien rates as the property stabilizes, typically over a 12- to 24-month period. Fannie Mae’s Sponsor-Dedicated Workforce (SDW) product gives borrowers a pricing benefit and streamlined underwriting in exchange for voluntarily restricting rents on at least 20% of units at or below 80% of area median income, or up to 100% to 120% AMI in cost-burdened markets. The compliance burden is minimal; borrowers submit an annual certification and rent rolls to their servicer, and there’s no third-party monitoring requirement. And because workforce housing loans fall outside the FHFA volume caps, this product has room to grow without bumping against lending limits.

Fannie Mae and Freddie Mac are also exploring structures that would allow them to take out construction loans on core-market assets before the property reaches full occupancy — potentially at 50% or 60% leased — with a sponsor guarantee that bridges the gap and burns off once the property stabilizes. Having spent nearly two decades in commercial real estate underwriting, I’ve seen deals in markets like New Jersey and New York — garden-style apartments with wait lists and strong lease-up velocity — go to life companies because the agencies couldn’t fund them until construction was fully complete. Structures like these are designed to change that outcome by pulling deals into the agency pipeline months earlier than the timeline would traditionally allow.

The pricing reinforces the appeal. CBRE data from Q4 showed average fixed agency rates for seven- to 10-year permanent loans at 5.3%, with multifamily spreads at 142 basis points. Debt funds were generally pricing at 250 to 325 basis points over SOFR, putting all-in rates well above agency levels. Life insurance companies stay competitive on high-quality assets but typically won’t go above 60% to 65% loan to value.

Once a borrower needs more leverage than that, agencies are often the only source with the scale and consistency to execute. That changes who shows up at the table. 

Large institutional sponsors — the kind that have historically done their business with banks because of faster rate locks, or with life companies because of more flexible loan documents — are engaging with agency products for the first time. The new products coming out of Fannie Mae and Freddie Mac have been created with that audience in mind. The goal is to bring borrowers to the agency who never had a reason to consider it before and give them a reason to keep coming back.

FHFA set this year’s caps at $88 billion per agency and committed to holding that floor even if the market comes in below projections. The capacity is there, but what will be more interesting is what kind of lending will fill that capacity. The last cycle rewarded speed above almost everything else, and lenders spent enormous energy on compressing timelines and rolling out specialty products that generated a handful of deals apiece.

Borrowers are telling us through their behavior that they want predictable credit managed by institutions with the imagination to structure around the specifics of a given deal. The agencies’ growth in market share is unlikely to come from doing more of the same conventional business at higher volume. It’s more likely to come from accumulating structured, deal-specific wins — near-stabilized takeouts, pre-stabilized guarantees, and workforce housing executions — in the part of the market where debt funds and life companies have operated without much competition for years.

The agencies have figured out that discipline and creativity work together. The borrowers and investors who depend on them are responding, and volume is following.

Tyler Paul is the Chief Credit Officer of NewPoint Real Estate Capital.
This column does not necessarily reflect the opinion of HousingWire’s editorial department and its owners. To contact the editor responsible for this piece: [email protected].