FREDDIE MAC INSURED COMMERCIAL REAL ESTATE LOAN

Freddie Mac Fixed and Floating Rate Apartment Loans

Freddie Mac provides a diverse portfolio of multifamily loan products for both the acquisitions and recapitalization of apartment communities.

Size: From $1,000,000 and up

Terms: Floating and fixed-rate options with 3, 5, 7, 10 + year terms

Amortization: Up to 30 years

Maximum LTV: 80% (subject to sub-market and debt service constraints)

Minimum DSCR: From 1.25 for market-rate properties

Recourse: Non-recourse with standard “bad boy” carve-outs

Rate Locks: Early rate-lock option available for varying durations, typically ranging from 60 to 120 days until Freddie Mac purchase; Index Lock and Fast Track Early Rate-Lock options also available.

Prepayment: Yield maintenance until securitized followed by 2-year lockout; defeasance thereafter. No prepayment premium for final 90 days.

Advantages:

Highly competitive pricing.
Early rate lock.
Up to 80% LTV.
Partial-term and full-term interest-only available.
Supplemental loans available.
Non-recourse.

Disadvantages:

Selective of the properties they will finance.
Require financially strong borrowers.

What you need for an Initial Quote?

Use these items to quickly find out if you qualify for your desired LTV, LTC, loan amount etc. This will only give a very broad picture but will also give a relatively fast positive/negative indication as to the feasibility of the loan in question. You will be able to upload your documents during the application process. Or you can email your supporting documents to: debora@dejozoc.om

• Trailing 12 months, month-by-month operating statements (P&L).

• Current rent roll.

• Indication that borrower net worth is greater than the loan amount and borrower liquidity is greater than 10% of the loan amount. If otherwise, a discussion would be required along with a PFS (personal financial statement)

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Freddie Mac Fixed-Rate Conventional Loans

Designed for the investor or developer seeking financing of standard multifamily properties, student housing, seniors housing, cooperative housing developments, and targeted affordable housing properties, including Section 8 and certain LIHTC developments. It is non-recourse ad offers flexible terms and amortizations of up to 30 years, and can offer financing up to $100 million (larger loans may be made on a case-by-case basis.)

Size: $5 million - $100 million (though smaller and larger loan amounts will be considered)

Use: Acquisition or refinance

Terms: 5-10 years (Up to 30 years if loan not purchased for securitization)

Amortization: Up to 30 years, with interest-only payment options

Maximum LTV/Minimum DSCR:

5-7 Year Loans:
- Amortizing: 75%/1.30x
- Partial Term Interest-Only: 75%/1.30x
- Full Term Interest-Only: 65%/1.40x
7 Year Loans:
- Amortizing: 80%/1.25x
- Partial Term Interest-Only: 80%/1.25x
- Full Term Interest-Only: 70%/1.30x
7+ Year Loans:
- Amortizing: 80%/1.25x
- Partial Term Interest-Only: 80%/1.25x
- Full Term Interest-Only: 70%1.35x

Recourse: Non-recourse with standard “bad boy” carve-outs

Prepayment Options: Yield maintenance until securitization, 2-year lock-out period following securitization, defeasance allowed after securitization. Yield maintenance for securitized loans is permitted for an additional fee. No pre-payment premiums required in the last 90 days of the loan.

Eligible Borrowers:

Eligible borrowers include limited partnerships, limited liability companies, corporations, or tenancies in common (TICs) with 10 or fewer members
In some circumstances (and with specific requirements), general partnerships, REITs, limited liability partnerships, and some trusts may also be eligible
Typically, borrowers must be single purpose entities (SPEs), however, on loans less than $5 million, borrowers may be able to be Single Asset Entities instead
For tenancies in common (TICs), each member needs to be a SPE

Eligible Properties:

Conventional multifamily properties, manufactured housing communities, seniors housing developments, cooperative housing, student housing developments, and targeted affordable housing, including LIHTC Year 4-10 and 11-15 and Section 8 properties

Refinancing Test: No test needed for amortizing loans with a DSCR of at least 1.40x and an LTV of less than or equal to 65%. Interest-only loans must pass a refinancing test before they are approved.

Assumability: Loans are assumable with lender approval, but require a 1% assumption fee paid to Freddie Mac. May also require an underwriting fee paid to the lender (typically $5,000.)

Timing: Borrower will typically receive a commitment 45 to 60 days after initial application; third-party report timing and borrower due diligence submission may speed up or slow down the process

Advantages:

Very competitive interest rates
Up to 80% LTV for some properties
Loans are non-recourse
Supplemental loans allowed
Mezzanine financing available
Early rate-lock options allowed, between 60-120 days before purchase, index locks are also available to eligible borrowers
Eligible mixed-use properties permitted

Disadvantages:

Requires replacement reserves
Requires third-party reports including Phase I Environmental Assessment, Appraisal, Physical Needs Assessment, Seismic Report may be required for properties in Seismic Zones 3 and 4
Application fees required: $2,000 or 0.1% of loan amount (whichever is larger) for conventional first mortgages, $5,000 or 0.15% of loan amount (whichever is larger) for seniors housing, $3,000 or 0.1% of loan amount (whichever is larger) for targeted affordable housing loans
Typically requires a loan origination fee
Typically requires between $8,000 and $12,000 in legal fees
Lender application fees also required (avg. of $15,000, including third-party reports, but may vary based on specific lender)
2% rate lock fee usually required (refunded after Freddie Mac purchases loan, usually around 30 days post-closing)

Freddie Mac Float-to-Fixed-Rate Loans

(Two-Plus-Seven)

Designed for the multifamily investor who wants to save cash upfront, while locking in a fixed-rate for at least several years of your loan.

Size: Sized based on fixed-rate

Terms: 9 years: 2 years floating-rate, interest-only, 7 years fixed-rate

Amortization: Up to 30 years

Interest Rate:

Variable-rate: 1-month LIBOR + 7-year floating pricing + 20 bps
Fixed rate: 7-year UST + 7-year fixed pricing + 20 bps

Maximum LTV/Minimum DSCR: Sized based on fixed-rate

Prepayment Options: No prepayments allowed during the 2 year variable-rate period, defeasance permitted during the fixed-rate period

Timing: Typically 60-75 days from application to closing

Advantages:

Very competitive interest rates
Loans are typically non-recourse
Automatic conversion to fixed-rate financing
Fixed-rate portion of the loan can be locked before closing
Supplemental loans allowed (starting in the second year of the fixed-rate period)

Disadvantages:

Typically requires third-party reports, including Appraisal, Phase I Environmental Assessment, and Physical Condition Assessment
Updated third-party reports required at conversion to fixed-rate financing (paid for by Freddie Mac unless additional loan funds are requested)
Application fee of $2,000 or 0.1% of loan amount required
2% rate lock fee usually required (refunded after Freddie Mac purchases loan, usually around 30 days post-closing).

Freddie Mac Floating-Rate Loans

For the investor or developer looking for adjustable-rate source of financing for a multifamily property.

Size: $5 million to $100 million (however, smaller and larger loan sizes will be considered)

Terms: 5, 7, and 10-year terms, partial term and full-term interest-only financing available. Typically, interest-rate caps are required and can be purchased from a third-party. Caps are not required for loans with an LTV of 60% or less.

Amortization: Up to 30 years

Interest Rate: Based on 1-month LIBOR index

Eligible Properties:

Freddie Mac Floating-rate loans are available for:

Standard multifamily housing properties
Manufactured housing communities
Seniors housing developments
Targeted Affordable Housing properties (including cash LIHTC Year 4-10 and 11-15 and Section 8 loans)

Freddie Mac Floating-Rate Loans are not available for cooperative housing properties.

Eligible Borrowers:

Limited partnerships, tenancies in commons (TICs), corporations, or limited liability companies
For loans over $5 million, the borrower must be a single purpose entity, while for loans under $5 million, the borrower may be a single asset entity
For tenancies in common, there must be no more than 10 tenants in common, and each must be a single purpose entity (SPE)

Maximum LTV/Minimum DSCR:

5-7 Year Loans:
- Amortizing: 75%/1.30x
- Partial Term Interest-Only: 75%/1.30x
- Full Term Interest-Only: 65%/1.40x
7 Year Loans:
- Amortizing: 80%/1.25x
- Partial Term Interest-Only: 80%/1.25x
- Full Term Interest-Only: 70%/1.35x
7+ Year Loans:
- Amortizing: 80%/1.25x
- Partial Term Interest-Only: 80%/1.25x
- Full Term Interest-Only: 70%1.35x

Prepayment Options: Options include:

1-year lockout followed by 7 years of 1% prepayment penalty
3% penalty in 1st year, 2% penalty in 2nd year, followed by 6 years of 1% prepayment penalty
5%, 4%, 3%, 2% step-down for the first 4 years, followed by 4 years of 1% prepayment penalty
7%, 6%, 5%, 4%, 3%, 2%, 1%, 1% step-down prepayment penalties (only available for 10-year capped floating rate loans)

*No prepayment penalties at all for the last 90 days of the loan

Recourse: Loans are non-recourse with standard “bad boy” carve-outs

Assumability: Loans are assumable with lender approval, but require a 1% assumption fee paid to Freddie Mac. May also require an underwriting fee paid to the lender (typically $5,000.)

Timing: Borrower will typically receive a commitment between 45 and 60 days after initial application; third-party report timing and borrower due diligence submission may speed up or slow down the process

Advantages:

Very competitive interest rates
Loans are non-recourse
Certain mixed-use properties are eligible
Can be effectively used as a bridge loan in many situations

Disadvantages:

Requires third-party reports including Phase I Environmental Assessment, Appraisal, Physical Needs Assessment, Seismic Report may be required for properties in Seismic Zones 3 and 4
Requires replacement reserves
Application fees required: $2,000 or 0.1% of loan amount (whichever is larger) for conventional first mortgages, $5,000 or 0.15% of loan amount (whichever is larger) for seniors housing, $3,000 or 0.1% of loan amount (whichever is larger) for targeted affordable housing loans
Typically requires a loan origination fee
Typically requires between $8,000 and $12,000 in legal fees
Lender application fees also required (avg. of $15,000, including third-party reports, but may vary based on specific lender)
2% rate lock fee usually required (refunded after Freddie Mac purchases loan, usually around 30 days post-closing)

Freddie Mac HUD Section 8 Financing

Designed Freddie Mac HUD^® Section 8 Financing is available in 10-30 year terms for Low-Income Housing Tax Credit (LIHTC) properties, and 5-15 year terms for non-LIHTC properties. In addition, these loans offer up to 90% maximum LTV and as low as 1.15x DSCR for LIHTC properties, and up to 80% maximum LTV and as low as 1.20x DSCR or non-LIHTC developments.

Size: Varies

Terms: 5-year minimum, 15-year maximum for cash loans, 10-year minimum, 30-year maximum for tax-exempt financing

Amortization: Up to 30 years for cash loans, up to 35 years for tax-exempt financing

Maximum LTV: 80% for non-Low-Income Housing Tax Credit (LIHTC) properties, 90% for LIHTC properties

Minimum DSCR:

Properties with Section 8 Housing Assistance Program (HAP) contracts in above average markets, with physical vacancies of 5% or less: 1.20x
Properties with new LIHTC credits: 1.15x
Some excess rent may be underwritten for above market long-term LIHTC contracts

Prepayment Options: Defeasance for non-LIHTC properties, yield maintenance for LIHTC properties

Eligible Borrowers: Need previous Section 8 ownership/management experience

Eligible Properties: High-rise properties, mid-rise properties, and garden apartment properties. Must have a Section 8 project-based contract or voucher.

Sellers/Servicers:

Cash loans with Section 8 project-based contracts: Targeted Affordable Housing (TAH) and Freddie Mac Multifamily Approved Conventional Sellers
Cash loans with Section 8 tenant based vouchers: Freddie Mac Multifamily Approved Conventional Sellers
Tax-exempt financing: TAH Sellers only

Section 8 Subsidies:

Eligible Section 8 subsidies include:

Project-based subsidies: Rental assistance tied to a specific property. Properties get cash payments determined by the number of tenants living in eligible units.
Tenant Based subsidies: Rental assistance tied to a specific tenant, not a specific property. Properties get cash payments determined by the number of qualifying occupants-- i.e. those with vouchers. Vouchers include:
- Regular vouchers: Most vouchers are regular vouchers, which limit payments to HUD's fair market rent in the particular area where the property is located.
- Enhanced vouchers: Enhanced Section 8 vouchers are provided to tenants living in properties that used to receive project-based subsidies, including properties where the owner has either determined to leave the Section 8 program, or has prepaid their government-insured mortgage. For tenants living in these properties, enhanced vouchers help them pay for rent increases-- which means these vouchers are typically based on the actual rent of the property.

Subordinate Financing: Permitted with additional requirements and analysis

Advantages:

Very competitive interest rates
Loans are non-recourse
Certain mixed-use properties are eligible

Disadvantages:

Typically requires third-party reports, including appraisal, Phase I Environmental Assessment, and physical condition assessment
Requires application fees, commitment fees, and other fees.

Freddie Mac Manufactured Housing Community Loan

For the investor or developer that wants to offer affordable housing.

Size: $1 million minimum

Terms: Up to 7, 5, and 10-year terms (longer loans may be approved on an individual basis), both fixed and variable-rate loans available, partial and full term interest-only loans also available

Amortization: Up to 30 years

Maximum LTV/Minimum DSCR:

5-7 Year Loans:
- Amortizing: 75%/1.30x
- Partial Term Interest-Only: 75%/1.30x
- Full Term Interest-Only: 65%/1.40x
7 Year Loans:
- Amortizing: 80%/1.25x
- Partial Term Interest-Only: 80%/1.25x
- Full Term Interest-Only: 70%/1.30x
7+ Year Loans:
- Amortizing: 80%/1.25x
- Partial Term Interest-Only: 80%/1.25x
- Full Term Interest-Only: 70%1.35x

Recourse: Most loans are non-recourse with standard “bad boy” carve-out

Eligible Borrowers:

Should have 2+ years experience owning manufactured housing communities, and should currently own at least one other manufactured housing community.
Can be a corporation, limited partnership, tenancy in common with no more than 10 members, or a limited liability company. REITs, general partnerships, some trusts, and limited liability partnerships are sometimes allowed, depending on the circumstances.
For loans less than $5 million, borrowers can be a Single Asset Entity or a Single Purpose Entity. For loans more than $5 million, they must be a Single Purpose Entity, or SPE, (except for tenants in common, which each member must be an SPE, regardless off size).

Eligible Properties:

Stabilized manufactured housing communities with professional management. Age restrictions allowed, but Seniors Housing Loans are not.
Must have at least five pad sites.
No more than 25% of homes can be rented out.
Manufactured homes must follow HUD^® safety standards, and must be compliant. with the Federal Manufactured Home Construction and Safety Standards Act of 1974.
Leases must not have the option to purchase either the pad site or a borrower owned manufactured home.
Private wells/septic systems are permitted under certain circumstances.
No RV resorts or broken condominiums allowed.

Sellers/Servicers: Freddie Mac Multifamily Approved Seller/Servicers can originate/service these loans, but in general, Freddie Mac prefers seller/servicers with specific experience financing manufactured housing communities.

Supplemental Financing: Available

Assumability: Loans are assumable with lender approval, but require a 1% assumption fee paid to Freddie Mac and a $5,000 underwriting fee paid to the lender

Timing: Borrower will typically receive a commitment 45 to 60 days after initial application; third-party report timing and borrower due diligence submission may speed up or slow down the process

Advantages:

Very competitive interest rates
Loans are non-recourse
60-120 day rate locks available, with early-rate lock, spread-lock, and index-lock options available
Loans fully assumable (with approval and fees)

Disadvantages:

Typically requires third-party reports, including appraisal, Phase I Environmental Assessment, and physical condition assessment
Application fees required: $2,000 or 0.1% of loan amount (whichever is larger)
Replacement reserves required ($50/pad site per year, or $250/rented manufactured home per year, if owned by the borrower and included in the loan's collateral)
Typically requires a loan origination fee
Typically requires between $8,000 and $12,000 in legal fees
Lender application fees also required (avg. of $15,000, including third-party reports, but may vary based on specific lender)
2% rate lock fee usually required (refunded after Freddie Mac purchases loan, usually around 30 days post-closing)

Manufactured Housing Resident Owned Community Loans

Minimum UBP Amount: $500,000

Terms: 5-30 year terms, fixed-rate loans only

Amortization: Up to 30 years

Maximum LTV/Minimum DSCR:

Market-Rate Rental:
- Acquisition/Conversion: 70%/1.40x
- Seasoned Refinance: 70%/1.40x
As Cooperative:
- Acquisition/Conversion: N/A/1.15x
- Seasoned Refinance: N/A/1.10x

Recourse: Most loans are non-recourse with standard “bad boy” carve-out

Eligible Borrowers:

Borrower must be a cooperative or association in which owning shares allows shareholders to occupy a certain pad site
At rate lock, 100% of pads must be owned by the borrower (as a cooperative or association), and resident shareholders must own at least 90% of shares

Eligible Properties: Existing, professionally managed MHCs (age restrictions allowed)

Transaction Types:

Acquisition/Conversions: These are designed for MHC properties in the process of transitioning from a rental property to a resident-owned manufactured housing community.
Seasoned Refinance: This is a refinance on a resident-owned manufactured housing community, typically after the majority of the shares have already been sold.

Supplemental Financing: Available

Other Requirements/Information:

Private wells/septic systems allowed in some circumstances.
No seller financing, preferred equity, wrap financing, or mezzanine financing is allowed.
Leases must not have the option to purchase either the pad site or a borrower owned manufactured home.
No RV resorts or broken condominiums allowed.

Refinancing Test: Required for all refinancing loans

Advantages:

Very competitive interest rates
Loans are non-recourse
Standard rate locks available

Disadvantages:

Typically requires third-party reports, including Appraisal, Phase I Environmental Assessment, and Physical Condition Assessment
Application fees required: $2,000 or 0.1% of loan amount (whichever is larger)
Replacement reserves required ($50/pad site per year, or $250/rented manufactured home per year, if owned by the borrower and included in the loan's collateral)