Government-sponsored enterprises (GSEs) Fannie Mae and Freddie Mac have unveiled their plans regarding tenant protections for multifamily properties with GSE-backed mortgages.
The Federal Housing Finance Agency announced in July that the tenant protections will 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.
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.
“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 today 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.”
These requirements will apply to all new loans for which an application is signed on or after Feb. 28, 2025. The exceptions are for manufactured housing communities, which have a separate tenant protection policy established by Duty to Serve; existing credit facilities that pre-date Feb. 28; loans for cooperative housing corporations; and loans that were originated using third-party form loan documents.
According to the FAQ, when leases do not meet the minimum requirements, borrowers have within six months of closing to begin incorporating them in new and renewing residential leases. If the current policies do not meet the minimum requirements, borrowers also have within six months of closing to inform all residents in writing of them. Within 24 months of closing, all residential leases must contain these requirements.
If there is a discrepancy between state or local requirements, borrowers should follow the more stringent standard or incorporate the longer time periods for tenant protections.
Fannie Mae and Freddie Mac will monitor the borrower implementation within their respective inspection and reporting processes. Questions will be included related to each borrower’s implementation within their property inspection processes. In addition, servicers will review inspection and reporting forms to check compliance, contact borrowers that may not be complying, and attempt to resolve any issues. Unresolved issues will be reported by the servicers to the GSEs.
According to the GSEs, the borrowers who are out of compliance will be provided with at least 30 calendar days to become compliant. Borrowers who fail to do so will be assessed a penalty of 0.2% of the original loan amount. A continued failure to comply could result in an event of default.
“Fannie Mae is committed to implementing protections that support housing stability for the individuals and families who live in the multifamily rental properties we back. The new Enterprise Multifamily Lease Standards align with our mission to expand access to housing that is both affordable and sustainable,” said Michele Evans, executive vice president and head of multifamily at Fannie Mae. “They reflect our comprehensive renter needs research and methodical approach to analyzing renter obstacles and outcomes and will provide the industry with consistent expectations regarding tenant notification and grace period practices.”
