In times of crisis, Freddie Mac is here to be a stabilizing force in the housing markets. When others might take a step back, we take a step forward, and that was certainly the case in 2020.

All told, Freddie Mac Multifamily financed more than 800,000 multifamily units, with 96% affordable to families making at or below 120% of area median income (AMI) and 73% affordable at 80% AMI. With $82.5 billion in total multifamily loan purchases for the year, we set a record during a pandemic, providing liquidity when the market needed it most.

We also surpassed our FHFA-set mission-driven requirement of 37.5%, with approximately 40% of our business focused on affordable properties and underserved communities. Our Targeted Affordable Housing business grew to $12 billion for the year, more than double its size just four years ago. We also reached another milestone through our Low-Income Housing Tax Credit (LIHTC) equity investments, which now total $1.5 billion in just three years.

Freddie Mac Multifamily maintained its presence in the capital markets too. Even at the height of pandemic-driven volatility, we continued to issue new bonds through our K-Deal® platform, transferring the bulk of Freddie Mac’s credit risk to investors. In 2020, we settled a record $77.8 billion in multifamily-backed securities.

The question of whether our securitization model can perform through market stress was put to the test. Not only did we pass, but the risk premium on our guaranteed bonds shrank to record lows, signaling high demand and investor confidence.

That confidence is well placed, not only because multifamily continues to outperform other real estate asset classes, but because our credit, underwriting and servicing standards lead the industry.

As we have learned, a pandemic uniquely impacts densely populated areas and directly affects the economic wellbeing of those who rent. There can be no doubt that many operators have struggled, especially those in hard-hit gateway cities like New York and San Francisco. Plain and simple, rent collections are down and vacancies are up in these markets, and there are new operational costs in the form of more aggressive sanitation requirements and other measures taken to keep residents safe. Although smaller cities like Sacramento, Indianapolis, and Phoenix have continued to see rent growth throughout the crisis, the pandemic’s effects have been persistent and far reaching.

Even with these challenges, we have not seen a flood of defaults to date and this is for several reasons.

First, Federal interventions provided direct payments, enhanced unemployment benefits and other support that has allowed renters to continue prioritizing rent payments.

Second, we took responsible action in the face of market uncertainty through requirements such as debt service reserves. Even before the pandemic, our credit parameters were created with stressed conditions in mind.

Finally, we established a nationwide forbearance program to provide flexibility for hard-hit borrowers and protections for renters. All told, there have been fewer than 1,500 loans with a forbearance agreement, amounting to less than 3% of unpaid principal balance across all loans. In December and based on UPB, nearly 90% of loans with an approved forbearance are current and in the repayment period or have fully repaid forborne loan amounts.

Our long-term commitment to credit quality and our response to the unique circumstances presented by the COVID-19 economy are why our delinquency rate remains well below industry standards.

As we project forward, the market is shaping up for a rebound in 2021. Freddie Mac’s 2020 volume surpassed 2019 levels as we fulfilled a countercyclical role, but the overall origination market shrank by about 17% to $302 billion. Our forecast for 2021 is a $340 billion market, with our purchase volume now capped by FHFA at $70 billion. This growth will require other multifamily debt providers to supply additional liquidity as we reduce our year-over-year purchase volume by at least 15%.

While remaining within the cap, we will continue working to fulfill our mission of providing stability, liquidity and affordability throughout the year. We will also work to meet and surpass a new 50% mission-driven requirement, which encourages loan purchases for properties meeting key affordability metrics. 

Perhaps most importantly, we are looking deeper within our mission for ways we can encourage a more equitable multifamily housing market. The events of the past year drew greater attention to persistent racial inequities, many of which are driven by a legacy of discrimination that has been a function of our housing system for generations.

As the largest multifamily lender in the world, we see both an opportunity and an obligation to find solutions to these injustices. This month, we announced a new officer-level position, Vice President of Equity in Multifamily, tasked with meeting this challenge head on. Our commitment to do more stems from a recognition that we cannot comprehensively fulfill our mission if we are ignoring systemic inequities that blunt our impact.

In the year ahead, our focus will also be inward.

We are energized by our efforts to foster greater inclusivity within our walls, so that we may also encourage it throughout the sector.

We are striving to create a world-class operating platform that harnesses the power of technology and data to introduce new efficiencies throughout the industry.

Finally, after a tumultuous year, we are working hard to continue as the leader in multifamily housing, whatever the future may hold.

©2024 by Freddie Mac.