1.2% Value Drop in Fannie Mae's Forecast Tightens Houston Refinancing

Fannie Mae now expects U.S. apartment values to fall 1.2% in 2026. At the end of last year the same model called for a 3.1% gain this year, according to the forecast table in Fannie's third-quarter 10-Q, filed Oct. 28.

The same table, in the filing's credit-loss section, trims the income outlook too: Fannie now projects net operating income growth of 0.2% for 2026, down from 1.9%, and it lowered its 2027 value forecast to 0.9% from 3.1%.

Those forecasts feed the loan-loss reserve. Fannie booked a $446 million multifamily provision for credit losses in the third quarter, up from $259 million in the second, and its Oct. 28 earnings release blamed weakening credit metrics on multifamily loans, the lower value forecast and elevated interest rates.

Two agencies, two different quarters

Freddie Mac said on Oct. 29 that its multifamily new business fell to $16 billion in the third quarter, from $25 billion a year earlier. Freddie said the drop was primarily driven by the higher mortgage interest rate environment, which puts the slowdown on the borrower's side of the table.

Fannie's dollar volume held steadier at $14.5 billion, against $14.2 billion in the second quarter. Its loan count fell to 613 from 848 in the third quarter of 2025, and adjustable-rate loans grew to 9% of the quarter's volume from 1%.

Adding up the quarterly releases, Freddie has bought about $47 billion of multifamily loans this year and Fannie about $45.8 billion, by our arithmetic. The FHFA set each 2026 cap at $88 billion, up from $73 billion in 2025.

Evan Kinne of George Smith Partners told the GlobeSt. Multifamily Forum, in coverage published Oct. 29, that he expects actual volume closer to $62 billion per agency. Either way, both companies have room left under their caps for a Houston borrower whose numbers work.

What the agencies see in their own books

The tightening shows up in how Fannie marks the loans it already holds. Its filing says 5% of the multifamily book now has a current debt service coverage ratio below 1.0, up from 4% at the end of 2025, and the serious delinquency rate on that slice is 6.54%, against 0.62% for the whole book.

Fannie said the weaker credit metrics came mainly from higher mark-to-market loan-to-value ratios, lower coverage as reported property income fell, and new delinquencies. Loans it classifies as criticized held at 6% of the book, the same share as at the end of 2025, and most of its substandard loans are still paying on time.

Freddie's measure moved the other way in September, falling to 0.58% from 0.64% in August, according to its monthly volume summary. That is still above the 0.51% of September 2025 and the 0.42% it posted in February.

Private-label debt looks worse. Trepp put the multifamily CMBS delinquency rate at 8.04% in September, up from 6.59% a year earlier, Scotsman Guide reported on Oct. 6.

What it means for owners and investors

A refinance is sized on value and income, the two inputs Fannie just marked down. In Houston, CRED iQ counted $3.7 billion of agency and fixed-rate CMBS apartment debt maturing between October 2026 and December 2028, and found 37% of that balance would need new equity to refinance, about $200 million in all.

Lee & Associates puts Houston's third-quarter cap rate at 6.8%, against the 6.28% Matthews reported for the second quarter, and Cushman & Wakefield's Oct. 26 MarketBeat has effective rents at $1,299, down 2.5% from a year earlier.

Cushman also counts only 96 Houston apartment sales worth $414.9 million through the third quarter, against 117 trades and $609.7 million in the same stretch of 2025.

Some maturing Houston loans have plenty of cushion. Remington Park, 428 units at 5510 South Rice Avenue built in 2000, carries a $42.5 million interest-only loan at 4.04% that matures Oct. 1, 2027, and reported 2.18 times debt coverage and 93% occupancy in the MSBAM 2017-C34 trust's October filing.

At 6.13%, the low end of Northmarq's Oct. 22 quote for a 10-year Freddie loan at 65% leverage, interest on the same balance would rise to about $2.61 million a year from about $1.72 million. By our math, coverage would fall to about 1.44 times.

A loan that starts near 1.0 has no such cushion. That is the 5% of Fannie's book carrying the 6.54% serious delinquency rate.

Gabe Lerner, an executive vice president at Lincoln Property Co., told Bisnow on Oct. 19 that maybe half of the loans maturing each year will end up owned by the lender.

Bridge lenders are filling some of the space in Houston. Lightstone refinanced the 293-unit Citadel Apartments in the Heights with a bridge loan from Greystar's debt fund, arranged by Newmark, and REBusinessOnline reported Oct. 30 that Thorofare Capital made a $16.5 million acquisition loan on a 240-unit property on Houston's northwest side.

For a buyer with equity, a lower value path at Fannie Mae means a lower basis. By the same arithmetic, Freddie still has about $41 billion of room under its cap and Fannie about $42.2 billion to finance it.

What to watch next

Fannie's 10-Q gives no metro breakdown for its forecast. The Southwest region, which includes Texas, slipped to 19% of Fannie's third-quarter volume from 21% a year earlier, and the filing does not say whether Houston values track above or below the national 1.2% decline.

Freddie's next monthly volume summary will show whether September's drop in delinquency held. SOFR, the benchmark for floating-rate loans, printed 3.94% on Oct. 29.

The Fed meets Dec. 8 and 9. Lisa Cook and Beth Hammack voted on Oct. 28 for a quarter-point hike, and the 10-year Treasury closed at 4.94% on Oct. 30, down from 5.05% on the day of the decision.