Fannie Mae has recently published new requirements for multifamily loans that may impact your property management operations and leases. Below includes critical information and resources to prepare for these new Policy requirements, which will be enforced beginning on February 28, 2025.

What is it?

Fannie Mae has established new protections within the Enterprise Multifamily Lease Standards Policy (the “Policy”) for multifamily housing borrowers concerning residential leases within multifamily properties.¹ Under this Policy, all new Government-Sponsored Enterprise loans require borrowers to include the following minimum standards (the “Standards”) to be included within tenant leases:

1. Written notice to tenant or renter at least 30 calendar days prior to a rent increase.

2. *Written notice to tenant or renter at least 30 calendar days prior to the scheduled expiration of a lease.

3. A grace period of at least 5 calendar days beginning on the rent due date before late fees or other penalties can be charged.

(*This does not apply to a lease term that is 2 months or less.²)

When will it happen?

These Standards will apply to all new loans for which an application is signed on or after February 28, 2025. It does not retroactively apply to loans closed or for which an application is signed before February 28, 2025.²

Within 6 months of loan closing, these Standards must begin to be incorporated in new and renewing leases. Even if current property policies do not meet the Standards within 6 months of loan closing and the Standards are not included in the leases yet, borrowers must inform all residential tenants of the new Standards.

All residential leases must contain the Standards within 24 months of loan closing.

How will it apply?

Borrowers will be responsible for drafting the leasing language within residential leases that meets these Standards (specific language for the Standards in new leases will not be provided). The requirement will apply to all new loan applications for multifamily properties signed on or after February 28, 2025, unless one of the following exceptions apply²:

1. Manufactured Housing Communities (MHCs) which fall under a separate tenant protections policy established by Duty to Serve;
2. Existing credit facilities including loans funded through credit facility agreements that pre-date February 28, 2025;
3. Loans for cooperative housing corporations; and
4. Loans that were originated using third-party (non-Enterprise) form loan documents.

How will it be enforced?

Government-Sponsored Enterprise lenders will monitor borrowers’ implementation within their inspection and reporting processes, including questions related to borrower implementation within their property inspection processes (usually conducted by servicers annually or bi-annually).³ Borrowers who are out of compliance will be provided at least 30 days’ notice to become compliant. If a borrower continues to be noncompliant, there will be a penalty of 0.20% of the original loan amount. Continued failure to comply will result in an event of default under the loan.

What if there is a conflict with state law?

If there is any conflict between the new Policy Standards and state (or local), the more stringent standard shall apply. For example, if a longer grace period is required by local law, borrowers should follow the local law in addition to meeting the other minimum requirements.  

Please feel free to contact us with any questions you may have.

[1] Fannie Mae Announces New Plans for Tenant Protections at GSE-Financed Multifamily Properties | Fannie Mae; see also Multifamily Lease Standards Policy (fanniemae.com)

[2] Multifamily Lease Standards Policy: External Frequently Asked Questions (fanniemae.com)

[3] Multifamily Lease Standards Policy (fanniemae.com)