Fannie Mae and Freddie Mac are unlikely to lend their full allocations for 2022, a first for the federal agencies and an indicator of how much multifamily borrowing demand has slowed nationwide.

The GSEs, which were granted $78B each for the year by the Federal Housing Finance Agency, will probably end the year at about $70B each in originations, Multi-Housing News reports. Fannie had originated $54.7B and Freddie $51.2B as of the end of October.

Demand for GSE loans has slacked off as interest rates have risen, but even when rates were lower, borrowers turned to other sources of finance in significant numbers.

In fact, the GSEs haven't been at the forefront of lending in the past two years, Geri Borger Urgo, head of production at NewPoint Real Estate Capital, said during Bisnow’s Multifamily Annual Conference early in December.

"They were sort of outpriced in the market, based on acquisition financings," Urgo said. "Bridge lenders came in, they liked the SOFR [Secured Overnight Financing Rate] when it was 30, it made a lot of sense to ... have a shorter-term view of what lease tradeouts were going to do."

The FHFA recently reduced Fannie and Freddie's 2023 allocations to $75B, down $3B from this year. At least half of the deals that each GSE does must involve affordable housing and traditionally underserved markets.

In cutting next year's allocations, the agency acknowledged that the market has slowed down, as higher interest rates continue to act as a damper on demand for mortgages.

"The 2023 caps reflect an anticipated contraction of the multifamily originations market in 2023," the agency said in a statement.