US real estate is facing more challenges as Fannie Mae (FNMA.US) and Freddie Mac (FMCC.US) are reportedly preparing to tighten lending rules.

According to reports, Fannie Mae (FNMA.US) and Freddie Mac (FMCC.US) are preparing to impose stricter rules on commercial real estate lenders and brokers after the U.S. regulator cracked down on fraud in the $trillions market.

The news sent Fannie Mae down 9% in the morning, and Freddie Mac down 12%.

Insiders said the initial plan would require lenders to independently verify the financial information provided by borrowers about their apartment communities and other multi-family residences. In addition, lenders may be required to meet stricter requirements to confirm borrowers have enough cash and to verify the source of funds.

The new rules may also require lenders to conduct due diligence on the appraised value of the property.

Fannie Mae and Freddie Mac do not make loans, but buy and securitize most of the U.S. residential and commercial mortgage market. The two U.S. government-backed enterprises own or guarantee about 40% of the $2.2 trillion multifamily mortgage market as of September 2023.

The new rules could be released as early as this summer, but insiders said the new rules are still in early stages and could change.