How Smarter GSE Construction Lending Could Supercharge ADUs
America’s housing crunch isn’t just about prices—it’s about supply. A recent industry push could make it easier (and cheaper) to build new homes and finish stalled projects, including backyard ADUs. The Mortgage Bankers Association (MBA) just urged Fannie Mae and Freddie Mac to modernize key parts of their construction and renovation lending. If these changes land, they could meaningfully unlock small-scale infill and homeowner-led projects—the exact lane where ADUs shine. The MortgagePoint -
What’s changing—and why it matters
In a July 15 letter to the GSEs, MBA recommended three practical updates:
- launch a pilot so single-close construction-to-permanent loans can be securitized at closing (instead of after construction),
- extend the age of borrower credit docs to 18 months to reflect real-world build timelines, and
- reduce Fannie Mae’s HomeStyle Renovation completion requirement from 90% to 50% to help finish partially built homes. MBA+2MBA+2
Why this matters for small builders and homeowners:
- Lower lender friction = more lenders offering CTP loans. Today, lenders must carry construction loans on warehouse lines until the home converts, which ties up capital—especially for IMBs. Upfront securitization would ease that pressure and broaden access. MBA
- Fewer re-underwrites mid-build. Extending credit-doc age to 18 months matches typical permitting and construction delays, reducing borrower churn and surprises. MBA
- Finish what’s half-done. Dropping HomeStyle’s threshold to 50% (with safeguards) could bring a lot of “almost there” properties across the finish line faster and more safely. MBA
MortgagePoint’s coverage sums it up: these tweaks aim to remove bottlenecks, improve liquidity, and ultimately support supply and affordability. That’s exactly what local infill (like ADUs, garage conversions, and gentle density) needs to scale. The MortgagePoint -
The ADU angle: fast, flexible, and local
ADUs are one of the most cost-effective ways to add homes where infrastructure already exists. But even small projects run into financing headwinds: long permitting cycles, change orders, and draws that don’t line up neatly with underwriting clocks. MBA’s proposals would help by:
- Smoothing cash flow during the build. If lenders can securitize earlier, more of them can offer single-close CTP loans at competitive pricing—which helps homeowners lock terms and proceed with confidence. MBA
- Reducing mid-project red tape. An 18-month doc window recognizes real timelines for site work, utilities, inspections, and supply chain. Fewer re-qualifications = fewer delays. MBA
- Reviving stalled small projects. A 50% completion threshold for HomeStyle Renovation—with inspections and holdbacks—would let more half-finished accessory structures (or main homes with planned ADUs) get back on track. MBA
What you can do now (before policy shifts land)
While we wait to see what Fannie and Freddie adopt, there are smart moves homeowners and builders can make today:
- Line up a design-to-permit path early. Clean plans and realistic schedules minimize cost creep and re-underwrites. (That’s our specialty at Ohana Dwellings.)
- Ask lenders about single-close CTP programs. Availability varies—shop around and get pre-qualified with an ADU-savvy lender.
- Keep draw schedules realistic. Match milestones to actual field sequencing (utilities, foundation, framing, MEP rough-ins) to avoid cash-flow gaps.
- Document like a pro. Stable income/employment proofs and timely change-order tracking reduce snags—especially if doc-age rules haven’t yet been extended in your loan.
Our take at Ohana Dwellings
If the GSEs move on MBA’s recommendations, expect broader lender participation, smoother borrower experience, and more finished homes—all tailwinds for ADUs and small infill. We’re watching this closely because better construction and renovation financing means more Californians can add gentle density, support multigenerational living, and build long-term wealth—one backyard at a time. The MortgagePoint -MBA
Need help mapping this to your project?
From feasibility and site planning to permit-ready plans and lender coordination, Ohana Dwellings can guide you end-to-end. If you’re considering an ADU in 2025, let’s align your scope, budget, and timeline with the best financing route available—today and as new options come online.
Sources: MortgagePoint reporting on MBA’s letter; MBA’s July 15, 2025 comment letter to Fannie Mae and Freddie Mac detailing securitization, documentation, and HomeStyle recommendations.
