Freddie Mac and Fannie Mae have announced new tenant protections for residents in multifamily properties with mortgages backed by the two Government-Sponsored Enterprises (GSEs), according to a release from the Federal Housing Finance Agency (FHFA).
The new multifamily lease standards policy requirement starting February 28, 2025 will require borrowers with new Enterprise-backed financing to provide residential tenants the following three minimum standards which will be included in all residential leases at properties for which applications for new loans are signed on or after the effective date.
The new multifamily lease standards are:
- 30-Day Notice of Rent Increases: Written notice of a rent increase at least 30 calendar days prior to said increase;
- 30-Day Notice of Lease Expiration: Written notice of the scheduled expiration of the residential lease at least 30 calendar days prior to said expiration;
- 5-Day Grace Period for Late Rent Payments: A minimum five calendar day period from the rent due date before late fees or other penalties can be charged, e.g., if rent is due on the 1st day of the month, a late fee cannot be charged until the 6th day of the month if rent is still unpaid.
“Fannie Mae and Freddie Mac’s (GSEs) announcements today of new multifamily tenant protections mark an important milestone by increasing transparency and improving communication between housing providers and tenants,” said FHFA Director Sandra L. Thompson.
In 2023, Fannie Mae financed approximately 482,000 units of multifamily rental housing, a significant majority of which were affordable to households earning at or below 120% of area median income, according to Mortgage Point.
“These lease standards seek to extend the reach of common baseline tenant protections,” said Kevin Palmer, Head of Multifamily for Freddie Mac. “Although many borrowers already exceed these minimum standards, all will be required to meet the standards to obtain GSE financing in the future. The details we released are intended to give lenders, borrowers, and other market participants clearer expectations with regard to how we will implement, monitor, and enforce the new requirement.”
Policy Targeting Tenant Protections Affects Financing Applications Beginning in March
The new policy will apply to new loans applied for after Feb. 28, 2025, and will not affect any loan applications signed before that date.
Excluded from the policy are:
- manufactured housing developments, which already fall under a separate tenant protection policy,
- loans for cooperative housing corporations,
- leases less than two months, and
- loans originated by third parties
Adjustments to the lease expiration requirement will be made for senior housing providers that may be unable to provide the necessary level of care for certain tenants.
Borrowers must begin implementing the new policies within six months of loan closing, and within 24 months all residential leases must contain the standards, according to government-sponsored enterprises Freddie Mac and Fannie Mae. Properties will be monitored for compliance through standard inspection and reporting processes.
Penalty Established!
As reported by CoStar, properties found to be out of compliance will have 30 days to become compliant or face a penalty equivalent to 20 basis points of the original loan amount. Continuing noncompliance will result in default and jeopardize future transactions with Freddie Mac and Fannie Mae.
For more information, visit https://multifamily.fanniemae.com/media/18601/display.
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