By Ann Atkinson, Regions Real Estate Capital Markets
Finance options for owner/operators of multifamily properties are consistently available via Fannie Mae and Freddie Mac. Both government-sponsored entities (GSEs), are governed by the Federal Housing Finance Agency (FHFA) and share a clear mission to support the health of the country’s housing market and its existing multifamily supply by providing financing options to borrowers.
Loans Accessible for Affordable, Workforce Properties
The support provided by both Fannie Mae and Freddie Mac to multifamily housing notably extends beyond market-rate rental properties, with both agencies dedicated to the availability of affordable and workforce housing units to low-income renters. Thus, Fannie Mae and Freddie Mac offer good loan options to consider for owner/operators active in these multifamily subsets. Let’s compare their offerings specific to small balance loans, as these are often the appropriate solutions for this range of multifamily properties.
Both Fannie Mae and Freddie Mac programs offer financing for the acquisition or refinance of stabilized multifamily properties. The properties must include five or more residential units and be stabilized. The agencies define stabilized as 90 percent occupancy for 90 days. In addition, both programs offer the following product features for small loans:
- Non-recourse, with standard carve-out provisions
- Up to 30-year amortization
- Up to 80 percent loan to value on acquisitions in certain markets
- Interest-only terms available
- Flexible prepayment options available including declining prepayment and yield maintenance
Let’s now dive a little deeper into the specific advantages of each program. The primary differences between Fannie Mae and Freddie Mac small balance programs are eligible loan amounts and processes.
Fannie Mae Small Loans Advantages:
- Loan amounts up to and including $9 million
- Delegated lender underwriting and servicing
- Debt-service coverage ratio (DSCR) minimum of 1.25 times
- Supplemental financing available
- In addition to multifamily affordable housing, Fannie Small Loans are available for: market-rate multifamily properties, manufactured housing communities and cooperative properties
- Green financing available for small loans
- Fixed rate: 5- to 30-year fixed-rate loan terms available
As a licensed Fannie Mae Small Loans lender and a licensed Fannie Mae Delegated Underwriting and Servicing (DUS®) lender, the Regions Real Estate Capital Markets team is ready to assist multifamily owner/operators interested in this offering. Explore the Fannie Mae DUS Small Loans Program details today.
Freddie Mac Optigo® Small Balance Loans Advantages:
- Loan amounts range from $1 million – $7.5 million
- Coupon pricing held at loan application
- DSCR minimum ranging from 1.20 – 1.40 times depending on market
- Fixed rate: 5-, 7- or 10-year fixed-rate loan terms available
- Hybrid adjustable rate mortgage (ARM): 10-year hybrid ARM with initial 5- and 7-year fixed-rate period; and 20-year hybrid ARM with initial 10-year fixed-rate period
Regions is a licensed lender to Freddie Mac for the Optigo Small Balance Loans program and was recently recognized as the Top 3 Small Balance Loan Lender by the agency. Explore the Freddie Mac Optigo Small Balance Loan Program offering today.
Regions Real Estate Capital Markets is a content partner of REBusinessOnline. For more articles from and news about Regions Real Estate Capital Markets, click here.
Looking to Finance?
The Regions Real Estate Capital Markets team can assist multifamily owner/operators looking for loan solutions for the acquisition or refinance of multifamily properties. Their team brings deep industry experience and can assist in examining which agency loan program is the best for each property, situation and need. Contact them today for guidance with the available Fannie Mae and Freddie Mac loan options.
About the Author
Ann Atkinson is managing director with Regions Real Estate Capital Markets, a leader in market-rate, workforce and affordable multifamily housing finance and approved lender partner to both Fannie Mae and Freddie Mac. Visit https://www.regions.com/commercial-banking/real-estate-banking/real-estate-capital-markets
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