The Countercyclical Nature of the Federal Housing Administration in Multifamily Finance

Samuel D. Young
Erin K. Browne
Patricia C. Moroz
U.S. Department of Housing and Urban Development

The views expressed in this article are those of the author and do not represent the official positions or policies of the Office of Policy Development and Research, the U.S. Department of Housing and Urban Development, or the U.S. Government.

Since the mortgage crisis of 2007–2008 and the resulting Great Recession, recognition has been growing of the importance of the Federal Housing Administration’s (FHA) countercyclical role in supporting the nation’s home mortgage lending market. Although much of the focus of this countercyclical role has been on FHA single-family mortgage insurance, this article examines the similar role that FHA plays for multifamily housing finance. Specifically, we examine FHA multifamily lending during the Great Recession. The paper begins with a high-level overview of the role FHA plays in multifamily financing and how an FHA-insured mortgage differs from conventional multifamily financing and multifamily mortgages insured by the government-sponsored enterprises, Fannie Mae and Freddie Mac. To provide real-world examples, we present two case studies: (1) the role FHA played in energy-affected markets during the oil price boom and bust in North Dakota and (2) an FHA-insured property under the Section 220 program in St. Louis that revitalized investment in the surrounding neighborhood. The report concludes with a discussion of FHA’s current place in the multifamily financing space and looks forward to where it might be headed.