Fannie, Freddie No Longer Backing Investment Rental Homes

Government-sponsored lenders Fannie Mae and Freddie Mac will no longer back mortgage loans for single-family rental homes purchased as an investment. 

Federal Housing Finance Agency Director Melvin Watt said in a statement, “What we learned as a result of the pilot [programs] is that the larger single-family rental investor market continues to perform successfully without the liquidity provided by the Enterprises." The pilot programs for both companies were put in place to "test and learn" how to best help the market recover. In 2017, Fannie Mae guaranteed a $1 billion deal for single-family rental company Invitation Homes, despite parent company and asset manager Blackstone was preparing its initial public offering, MarketWatch reports, drawing the criticism of many housing experts and advocates. 

Julia Gordon, executive director of the National Community Stabilization Trust, along with the National Association of Realtors voiced their support of the decision. Says Gordon, “I think it was a responsible decision, and I’m looking forward to continued engagement with [Fannie and Freddie] over ways in which they might modernize traditional investor financing." 

And on Tuesday, the National Association of Home Builders noted that the market share of single-family homes built as rentals increased over the past four quarters, to 42,000 from 29,000 over the prior four quarters. But as the builder group noted, “the primary source of single-family rental homes is not construction but the existing housing stock. In fact, from 2005 to 2015, 56 percent of the gains in the rental housing stock were due to increases of for-rent single-family homes.”

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