Fannie Mae, Freddie Mac Roll Out New Multifamily Tenant Protection Framework

Fannie Mae and Freddie Mac have introduced a new tenant protection framework for multifamily properties with GSE-backed mortgages, effective from February 28, 2025.

Jordan B. & Han-Gwon Lung
August 30, 2024

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Good morning. Fannie Mae and Freddie Mac have introduced a new tenant protection framework for multifamily properties with GSE-backed mortgages, effective from February 28, 2025.

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Lending Regulations

Fannie Mae and Freddie Mac Announce Tenant Protection Framework

Freddie Mac and Fannie Mae are rolling out new lease standards aimed at bolstering tenant protections for multifamily properties seeking financing.

Enhanced protections: Fannie Mae and Freddie Mac posted a policy framework and FAQ documents this week to provide additional transparency to tenants and to help lenders and borrowers implement these new requirements. The standards, announced by the FHFA in July, will be effective for loans signed on or after February 28, 2025, the protections include:

A five-day grace period for rent payments;
A 30-day notice for rent increases; and
A 30-day notice of a lease expiration.

Timeline: Certain properties, such as manufactured housing, cooperative housing, and short-term leases, are exempt from these requirements. Borrowers have 6 months post-loan closing to integrate these standards into their leases, with full compliance expected within 24 months. Monitoring will be done through regular inspections and reports.

Penalties: Properties failing to meet the new standards within 30 days of a violation notice could face penalties, including a fee equivalent to 20 basis points of the original loan amount. Continued noncompliance may result in default and impact future transactions with government-sponsored enterprises (GSEs).

From the horse’s mouth: “These lease standards seek to extend the reach of common baseline tenant protections,” said Kevin Palmer, Freddie Mac’s head of Multifamily. While many borrowers already meet or exceed these standards, compliance will now be mandatory for all seeking GSE financing.

➥ THE TAKEAWAY

Big picture: This landmark announcement ushers in a new era of tenant protections in federally supported housing. The new rules will require stricter verification and due diligence from lenders, including confirming borrower financials and property valuations. This change may slow down deal activity in the multifamily sector, but stakeholders view it as necessary.

📊 Do you support the new tenant protection framework by Fannie Mae and Freddie Mac?

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✍️ Editor’s Picks

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🏬 RETAIL

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🏢 OFFICE

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🏨 HOSPITALITY

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