Enhanced Requirements

Under the new guidelines, lenders will be required to independently verify borrowers’ financial information and funding sources for multifamily properties. This includes rigorous due diligence on property valuations and financial performance, addressing the current reliance on unverified borrower-provided data.

Current Climate

The rise in interest rates has caused a decline in property values, revealing more fraudulent mortgage schemes. In response, federal authorities, including the FHFA, are initiating these regulatory changes to combat fraud in commercial real estate. Fannie Mae and Freddie Mac, which back around 40% of the $2.2 trillion multifamily mortgage market, are at the forefront of these efforts.

Industry Impact

The crackdown has resulted in Fannie Mae and Freddie Mac blacklisting brokerage firms like Meridian Capital Group, which have been implicated in falsifying client financials to obtain larger loans. Major brokers are also tightening their practices, opting for direct business over brokered deals.

Key Takeaway

Experts predict these regulations, though in the early stages, could be implemented as early as this summer. If adopted, the new rules will significantly alter Fannie Mae and Freddie Mac’s loan monitoring processes, potentially slowing multifamily deal activity in the market.