While Freddie Mac held a pricing advantage on affordable housing deals as 2008 came to an end, Fannie Mae has closed the gap, and the two were about even in late February.

Immediate funding deals for tax credit properties were quoting in the mid- to upper 6 percent range in late February.

But rates on forward commitments from the government-sponsored enterprises remain high. Interest rates for funded forward commitments are in the high 7 percent range, and prices are above 8 percent for unfunded forward commitments.

“They’re pricing in a significant amount of risk premium into forward pricing at the moment,” said Phil Melton, senior vice president of Grandbridge Real Estate Capital. “That’s driven by the fact that there is a significant amount of forwards that are not converting at the time that they’re supposed to.”

Forward commitments are loans on 9 percent tax credit deals undergoing new construction or substantial rehabilitation. In a funded forward, Fannie Mae agrees to purchase the permanent loan and also provides funds to the deal’s construction lender; an unfunded forward commitment provides a rate-lock and commitment to fund the permanent mortgage once construction is complete.

Fannie Mae has also tightened its credit standards on immediate fundings for 9 percent deals in pre-review markets, or weaker markets where the agency assesses deals on a cash-by-case basis. Deals are being underwritten at 75 percent or 80 percent loan to value (LTV) and 1.25x debt-service coverage ratio (DSCR) in pre-review markets, as opposed to the 90 percent LTV and 1.15x DSCR the program offered. But even for deals in strong markets, Fannie Mae will often only go to 85 percent LTV and 1.20x DSCR, as of late February.  

Freddie Mac has scaled back as well: 35-year amortizations, once a competitive advantage, are not being offered as much anymore. “It used to be an automatic, but now it’s deal- and market-specific,” said Melton.

Grandbridge hopes to be the next lender approved for Freddie Mac’s Targeted Affordable Housing program and may secure the license by the end of March. Last fall, Freddie announced that all of its affordable housing deals must be done through its Targeted Affordable Housing program, a delegated risk-share model that it continues to develop. Only eight lenders are currently part of the program.