May 11th, 2025
Freddie Mac is actively steering multifamily borrowers towards 10-Year fixed rate loans by tightening qualification standards for 5-year terms and offering more attractive credit terms for longer debt. This strategic pivot comes as investor demand grows for longer duration securities, which offer better liquidity and pricing in the secondary market.
While 5-year loans have been favored recently due to rate cut expectations and flexible refinancing, Freddie's updated refinancing test now make those shorter-term deals harder to secure. The new model places stricter economic assumptions on short-term debt, nudging borrowers toward longer term securities.
For large borrowers-specifically those owning 10,000+ units, Freddie is now offering 35-year amortization and a lower debt service coverage ratio of 1.20x (vs 1.25x), which can significantly increase loan proceeds. These terms were previously reserved for affordable housing and special exceptions.
Fannie Mae has not made similar adjustments, though it also saw a rise in 5-year loans last year. Freddie's new stance could influence deal structures, loan proceeds, and asset-level strategy moving forward.
Foreign-owned banks modestly expanded their U.S. CRE lending in 2024, growing their holdings by 2.8% to almost $252 billion. This is double the pace of growth seen in 2023. In contrast, the top 100 U.S. banks reduced their CRE exposure by 1%, signaling a divergence in risk appetite and strategic focus.
Canadian banks were the dominant foreign players, with TD Bank leading at $32.79 billion in U.S CRE loans. Japanese and Isreali lenders also increased their presence significantly, with institutions like Sumitomo Mitsui and IDB Bank recording double-digit loan book growth. Meanwhile, Chinese banks continued retreating from the U.S. market amid geopolitical tensions and domestic economic uncertainty.
The surge was particularly notable in construction and land loans, which rose 13.6% YOY, suggesting a renewed appetite among foreign investors for U.S. development opportunities, potentially in anticipation of a more favorable rate environment. Despite this growth, foreign owned banks still represent a small slice of the U.S. CRE debt market. JP Morgan and Wells Fargo alone hold more CRE debt than all 40 of the top foreign lenders combined.
Second Trump Administration Tax Reform: Expected to be more modest than 2017's TJCA; focus is likely on extending expiring provisions rather than major overhauls.
SALT Deduction Cap: A potential increase (from $10k to $20-$30k) could slightly boost disposable income in high-tax states but is unlikely to reverse migration trends we saw accelerate during Covid and today.
Impact on Real Estate:
Residential & Retail sectors in gateway markets could benefit modestly from higher after-tax incomes.
Migration Trends: No major reversal expected because tax incentives will still favor lower-tax states.
Carried Interest: Possibly a target for reform but no clear path forward yet.
April Jobs Report:
The U.S. job market outperformed expectations in April, adding 177,000 jobs and keeping unemployment steady at 4.2%, fueling a stock rally and pushing anticipated Federal Reserve rate cuts further out. Despite the headline strength, deeper data suggests cooling beneath the surface.
Job growth was concentrated in service sectors—particularly healthcare and education—while goods-producing roles saw minimal expansion, limited solely to construction. Consumer-facing industries like food services also showed signs of recovery. The transportation and warehousing sector surged, adding nearly 10,000 warehousing jobs, driven by a spike in imports and inventory buildup—a trend analysts expect to be short-lived as new orders slow and layoffs begin in trucking.
Initial and continuing unemployment claims are rising, and early federal workforce cuts have begun. Broader economic data shows Q1 GDP contracted by 0.3%, the first decline in three years, largely due to front-loaded imports ahead of proposed tariffs. While consumer spending remains stable, business investment is softening, raising concerns about future job cuts and a slowdown in economic growth.
Updated Positive HUD Guidance
HUD has lifted prior limitations on refinancing newly constructed properties under the Section 223(f) program, notably those consisting of single-family homes or predominantly small-scale (≤5 units) buildings. The 2021 guidance restricting such applications has been rescinded, and while new regulatory direction is pending, deals will be evaluated individually for eligibility. In parallel,
HUD is prioritizing streamlining environmental review requirements—specifically addressing radon protocols in light of FHFA’s updates and aligning with the Federal Flood Risk Management Standard—to help reduce costs and delays in multifamily loan processing.
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