All Forum Posts by: Dushyant Ravi

A 5 year Freddie floater is available. Pre-pay will be 1 year lockout and then 1% after that and no premium for the final 90 days. Loans are generally $5MM and above for that program but smaller loans can be considered on a case by case basis. A 5 yr ARM and 7 yr ARM are also available with Fannie. The 7 yr Fannie product may offer more leverage as the 5 yr product has a max 65% LTV constraint. Any particular reason you prefer a floater? Most people choose a fixed rate loan as even with a floater the way they are sized is that the loan amount must not exceed that of a fixed-rate loan of similar terms. So proceeds will be the same regardless of whether it is fixed or float but yes there is a difference in prepay structures. Though even with a fixed rate loan, for a little higher rate you can have a step down prepay or adjust the yield maintenance period.

Specific requirements with agency financing is mainly the loan size- greater than $1MM and sponsor/borrowing entity- net worth of 100% of loan amount, liquidity of 10% of the loan amount post close, comparable size MF ownership experience, essentially track record, experience and wherewithal.

In terms of prepay, a key component of agency financing besides it being non recourse and having long fixed rate loan term is the lack of prepayment capability. It is hence a better fit for long term holds. If you want pre payment flexibility, options with agency financing are step down prepay for example- 5-4-3-2-1 for a 5 year loan term, or 5-5-4-4-3-3-2-2-1-1 for a 10 year loan term. There is no option with no prepayment penalties due to the securitization nature of the agency business.

Financing large multifamily assets nationwide particularly via agency (Freddie/Fannie) debt is what I specialize in as a banker and a direct lender. Feel free to reach out if you have any questions. Happy to be a resource. 

 I am a banker and a direct lender specializing in Fannie/Freddie debt for multifamily properties. There is standard yield maintenance and defeasance even for 30 year loans. Most people do not choose this but there is also an option to do declining pre-pay which for a 30 year loan means 5% Loan Years 1 through 7; 4% Loan Years 8 through 9; 3% Loan Years 10 through 11; 2% Loan Years 12 through 13; 1% through the 90 days prior to Maturity Date. 

The specific requirements with agency financing is mainly the loan size and sponsor/borrowing entity (NW of 100% of loan amount, liquidity of 10% of the loan amount post close, comparable size MF ownership experience, essentially track record, experience and wherewithal). Deals can be crossed but unfortunately small loans under the threshold cannot be crossed to get us over the threshold, they have to above the minimum loan size individually. And yes, 30 year amort with optional I/O periods are always an option for agency loans!

To your point on Fannie & Freddie loans, yes you are partially right. As a banker I specialize in agency financing I finance multifamily (5+units) and mobile home park properties nationwide on behalf of Fannie & Freddie. Freddie has a SBL program which has a minimum of $1MM requirement. While Fannie has a small loan program with a minimum of $750K, honestly, that's more in theory and still a $1MM minimum is what we mostly finance. While there are minimum loan amounts and sponsorship eligibility (mainly NW, Liq, experience) requirements, if these are met, then Fannie & Freddie offers long term fixed rate loans (5,7,10,12,15,20 or even 30 year terms) with 30 year amortization and I/O periods.

I specialize in agency loans as a banker, we have 50% market share and are the largest funding source, however, not every property, deal type, sponsor (you mentioned prior comparable experience, that is important but also NW & Liq requirements), etc is a fit for agency, and that's why you have plenty of local banks, cmbs, debt funds/private money also financing multifamily. It is very common to get financed by local banks first before being eligible for agency financing. 

Yeah if agency financing is not a fit then private money like the lender you mentioned or local banks are the way to go and there are lot of them out there. For comparison as a data point, I just recently financed two MHP's. Loan Amount- $2.7MM, Leverage- 80%, Loan Term- 10 years, Amortization- 30 years, Interest Only Period- Full term (10 years), Rate- 200 bps over 10 year UST (~4%), Non Recourse. Another one was Loan Amount- $1.38MM, Leverage- 75%, Loan Term- 10 years, Amortization- 30 years, Interest Only Period- Full Term (10 years), Rate-180 bps over 10 year UST (~3.8%), Non Recourse. These are pretty standard agency terms. What you mentioned are pretty standard bank or private money terms. This is why if its the right asset and if the sponsors are eligible for agency financing (mainly NW & Liq requirements, experience, etc), investors choose agency financing and often have to put up with their guidelines. 

Different lenders (agency, bank, debt fund, cmbs, etc) will have their own methodology. Bridge lenders may underwrite to a "as stabilized" and not "as is" if there is a heavy value add plan. I am in agency lending and we use the in place latest RR with the contractual rents for leased units and market rents for vacant units. 

As mentioned financing is a big part of the equation. I work in agency financing and Freddie & Fannie love MHP's due to their mission driven mandates and affordable rents. They finance MHP's nationwide but have a set of guidelines- proceeds atleast $1MM or close to it, well maintained parks, predominantly TOH's, etc. If these guidelines are not met, then local banks are the only option. But for many buying rough parks with POH, the business plan will be to improve the asset, convert POH to TOH and if the business plan is executed, agencies can provide the take out and refi once you stabilize the asset. A reason why you will often find investors playing within the guidelines the agencies set is because of what they offer- aggressive leverage (70-80% LTV), long loan terms, cheap rates, non recourse, etc. Local banks might need a sliver of recourse or full recourse and have shorter loan terms.