Not finding the rates being discussed on podcasts

[Horace Mann]

I have been hearing that commercial apartment rates are in the 6.5% range from several podcasts recently. I am working on a 7 family and a 9 family deal, but all of my local lending contacts for commercial loans are quoting me between 7.5% and 8%. For DSCR qualification that 1%-1.5% makes a big difference. Do I just need to look harder or is what I am hearing mostly geared toward the 50+ unit deals? Thanks everyone!

[Ian Stuart]

The podcast you mention is referencing (i) Freddie Mac Small Balance Loans ("SBL"), and (ii) Fannie Mae Small Loans, which are essentially government-backed CMBS loans.

Freddie & Fannie small balance loans range from 5-30 year loan term. Standard loan sizing 75-80% LTV; 1.20-1.25x DCR; 30-year amortization in Top & Standard markets. Partial term IO @ 1.20-1.25x DCR, full term IO @ 1.35-1.40x DCR. Rates are in the high 5.00% - low 6.00% range for "Mission Driven" assets with rents <=80% AMI Net Max Rents. These loans are all non-recourse, with carveouts for "bad boy" acts (IE - fraud, deliberate misrepresentation, abandoning property, etc.). Prepayment is typically either (i) Greater of YM / 1.00%, or (ii) YM; 3 Mos Open @ 1.0%; 3 Mos Open @ Par. Flex prepays (stepdowns, etc) are available but will cost additional bps. Cash out refis ok, but may result in slightly lower loan sizing.

With Freddie Mac SBL, you rate lock at loan application (no interest rate risk during underwriting). With Fannie Mae Small Loans, you can't rate lock until Loan Commitment is issued, typically ~2 months after you go under application. 

Berkadia is the #1 Freddie Mac and #2 Fannie Mae multifamily lender in the nation. Reach out with questions. 

Agency Multifamily Small Balance Loan Rates (05.31.24)

-Ian