Fannie Mae’s New Fund

4 min read

Raymond James joins to launch new efforts 

Returning equity investor Fannie Mae doesn’t expect the new changes to the tax code will crimp its return to the Low Income Housing Tax Credit market. In fact, it has announced its first LIHTC fund, through Raymond James Tax Credit Funds, and is targeting the money to be used for disaster relief and underserved markets.

Some in the tax credit arena have worried that the reduction in corporate tax rates in the new tax law may lessen the need for tax credits at some institutions. But according to Dana Brown, vice president for LIHTC investments at the giant agency, “We do not anticipate any impact on our ability, capacity or plans to participate in the LIHTC market as an equity investor.”

And he pronounced himself “thrilled” that Fannie Mae is getting back into the market after a decade-long absence caused by the real estate crash of 2006-2007 and Fannie Mae subsequently being taken into conservatorship by the federal government in 2008.

Old partners, new product

Fannie Mae last month announced a $100 million LIHTC fund in partnership with syndicator Raymond James Tax Credit Funds, Inc. The fund is expected to make its first equity investment in the first quarter of this year.

The Raymond James Affordable Housing Fund 11 LLC will concentrate on areas devastated by Hurricane Harvey last year, as well as rural markets and housing in Native American areas. It will also try to promote resiliency in areas prone to floods and storms. It will fund both rehabs and new construction.

Hurricane Harvey, which has been credited with causing the most extreme rainstorm in American history, flooded large areas of Texas and Louisiana in August of last year. Houston was hit particularly hard.

Brown pointed out that Fannie Mae has had a longstanding presence in Native markets. “We’re looking at ways to broaden the self sufficiency of tribes, both through LIHTC and on the debt side,” he said, calling this “a worthy goal.”

“We’re looking at a number of deals, but it is premature to talk of any specifically,” Brown said.

The $100 million deal is a new venture for old partners in the LIHTC arena. “There is a need for capital to help shore up the supply of housing damaged by Hurricane Harvey and other underserved markets,” according to Brown. “This fund vehicle is an ideal tool to help make this happen and to support affordable multifamily housing overall.”

Brown said he expected Fannie Mae would be announcing further LIHTC funds this year. “We intend to use that cap ($500 million) to support the market.” He said “it remains to be seen” whether the new tax code will affect the pricing on LIHTC deals.

Fannie Mae and cousin agency Freddie Mac were approved to return as equity investors in November of last year by their regulator, the Federal Housing Finance Agency. Each was authorized to make $500 million in LIHTC investments this year, with any above $300 million being targeted to specific areas mandated by the FHFA.

These targets appear to be somewhat correlated with the agencies’ “Duty to Serve” requirements mandated by the Housing and Economic Recovery Act (HERA) of 2008. These include affordable housing preservation, rural housing and manufactured housing.

“HERA informs part of our investment strategy,” said Brown.

Freddie Mac has yet to announce its first LIHTC deal, though it is believed to be targeted for the first quarter.  David Leopold, vice president of targeted affordable sales and investments for Freddie Mac Multifamily, commented, “We are currently working to partner with an experienced LIHTC syndicator to invest in affordable housing. We will be reentering the LIHTC investment business to provide stability to underserved markets, and will have more to say about our first transaction in the near future.”

The $1 billion in equity authority will make the two agencies major players in the LIHTC area again, though not as big as they were a dozen years ago when they held 30 to 40 percent of the market.

Story Contacts:
Dana Brown
Vice President, LIHTC investments at Fannie Mae
[email protected].

David Leopold
Vice President of Targeted Affordable Sales and Investment for
Freddie Mac Multifamily
[email protected]

Mark Fogarty has covered housing and mortgages for more than 30 years. A former editor at National Mortgage News, he has written extensively about tax credits.