Freddie Mac SBL & Fannie Mae Small Loan Financing - Multifamily Apartments

[Ian Stuart]

In light of the recent 50bps rate cut, we're starting to see an uptick in requests for Freddie Mac SBL and Fannie Small Loan multifamily loan quotes. Given the recent pickup in activity, I thought this would be a good time to re-hash the agencies' small balance multifamily loan programs for future reference. 

In short, Freddie Mac & Fannie Mae offer 70-80% LTV, 1.20-1.25x DCR, 30-year amortization, 5-30 year term, partial-full term IO, non-recourse permanent financing for owners of multifamily apartment buildings throughout the United States. Rates currently range from the high 4.00% - mid 5.00%'s depending on the asset / borrower / location.

Freddie Mac & Fannie Mae multifamily loans essentially offer low rate, high leverage, non-recourse permanent financing options that are backed by the full faith and credit of the United States government. They're like bank & credit union loans... but with (i) more leverage, (ii) more interest only, (iii) [typically] lower rates, (iv) non-recourse structure, and (v) no deposit requirements / no requirement to start "a relationship". 

Minimum loan size is $1,000,000. Cash out refinances are acceptable within reason. Borrowers need to have 9 Months' P&I worth of liquidity (cash / stocks / bonds / crypto / etc), and 100% net worth relative to the loan amount. Retirement accounts don't count towards liquidity, nor do non-liquid investments like VC, etc. 

Berkadia is #1 Freddie Mac Optigo, #2 Fannie Mae DUS , and #1 HUD/FHA multifamily lender in the country with 50+ life company correspondent lending relationships. We also broker multifamily loans to banks, credit unions, CMBS, debt funds, and private lenders. Next time you're in the market for multifamily financing (or generally speaking, want to learn more about different multifamily loan programs available to you), feel free to reach out for guidance.

FREDDIE MAC SMALL BALANCE LOAN (SBL)

Loan Purpose: Permanent Financing (Refi & Acquisition)

Loan Proceeds: $1,000,000 - $7,500,000

Loan Sizing: 80% LTV; 1.20x DCR (Top Market)

Loan Sizing: 80% LTV; 1.25x DCR (Standard Market)

Loan Sizing: 70-75% LTV; 1.30x DCR (Small Market)

Loan Sizing: 70-75% LTV; 1.40x DCR (Very Small Market)

Amortization: 30 Years

Loan Term: 5-10 Year Term (Fixed), 10 or 20 Years (Hybrid ARM)

IO Term: Partial Term IO (80% LTV; 1.20x DCR); Full Term IO (65% LTV; 1.35x DCR) (Top Market)

IO Term: Partial Term IO (80% LTV; 1.25x DCR); Full Term IO (65% LTV; 1.40x DCR) (Standard Market)

IO Term: Partial Term IO (70-75% LTV; 1.30x DCR); Full Term IO (60% LTV; 1.45x DCR) (Small MArket)

IO Term: Partial Term IO (70-75% LTV; 1.40x DCR); Full Term IO (60% LTV; 1.55x DCR) (Very Small Market)

Rate Types: Fixed & Hybrid ARM

Rate Lock: Rate Lock @ Application

Non-Recourse: Non-Recourse w/ “Bad Boy” Carveouts

Prepayment: Standard - Greater of YM or 1.00%

Flexible Prepay: Flexible Options – Stepdown & Extended Open/Par Periods

Rate Buydowns: Yes – Rate Buydowns Available Up to 2.00%

Assumable: Yes – Assumable Loan

Cash Out Refi: Yes – Cash Out Refi OK

FANNIE MAE SMALL LOAN

Loan Purpose: Permanent Financing (Refi & Acquisition)

Loan Proceeds: $1,000,000 - $9,000,000

Loan Sizing: 75-80% LTV; 1.25x DCR

Amortization: 30 Years

Loan Term: 5-30 Year Term

IO Term (PTIO): Partial Term IO @ 80% LTV; 1.25x DCR

IO Term (FTIO): Full Term IO @ 65% LTV; 1.35x DCR

Rate Type: Fixed Rate

Rate Lock: Rate Lock @ Loan Commitment

Rate Structure: Treasury Yield + Spread

Non-Recourse: Non-Recourse w/ “Bad Boy” Carveouts

Prepayment: Yield Maintenance; 3 Mos @ 1.00%; 3 Mos @ Par

Flexible Prepay: Flexible Prepayment Options Available

Escrows: Taxes, Insurance, Replacement Reserves

Rate Buydowns: Yes - Rate Buydowns Available Up to (1.25%-2.00%)

Assumable: Yes – Assumable Loan

Cash Out Refi: Yes – Cash Out Refi OK

[Ian Stuart]

Quote from @Robert Quiroz:

@Ian Stuart

I understand that the banks will see me as additional risk since I'm new to multi family.  What does it take to get out of that category? After the first purchase? After I show tax returns? 

In order to get out of Freddie Mac's "Limited Multifamily Experience Sponsor" category, you must have ultimate ownership & control of either (i) 3 multifamily properties [1 of which you've owned for at least 2 years], or (ii) 1 multifamily property which you've owned for at least 5 years. 

That said, if the property you're attempting to finance is materially larger than the properties you currently operate (IE - you're trying to finance a 30 unit building, but have only operated a series of 4-plexes to date), then sometimes this rule gets thrown out the window and you'll still be subject to the "Limited Multifamily Experience Sponsor" re-sizing parameters.