Fannie Mae Multifamily Structured ARM Loans
For financing a large multifamily property with an adjustable-rate mortgage, a Fannie Mae Structured ARM could be a great choice.
ARM Loans for Large Apartment Buildings and Multifamily Properties Insured by Fannie Mae
Multifamily investors looking to finance larger apartment buildings or multifamily developments with an adjustable-rate product may find that Fannie Mae’s ARM 7-4 and 7-6 fall a little short. In lieu of this, the Fannie Mae Structured ARM is the alternative to look into. With the Fannie Mae Structured ARM, the minimum loan amount is a whopping $25 million. Speaking to the program’s flexibility, the Structured ARM product has a minimum DSCR requirement of 1.00x at the maximum interest rate. Of course, these loans follow the Fannie Mae standard of being non-recourse and fully assumable (with lender approval and a 1% fee).
2021 Sample Fannie Mae Terms For Structured ARM Loans
Size: $25 million minimum loan amount
Terms: 5, 7, or 10 years
Amortization: Up to 30 years
Interest Rate: Based on the 1-month or 3-month LIBOR, both convertible and non-convertible options are available
Interest Rate Cap: No built-in caps, borrowers need to purchase an interest-rate cap from an approved provider. Initial interest rate caps must be at least 4 years, but, if the interest rate cap is smaller than the loan term, the borrower must put funds in escrow monthly for the next cap.
Maximum LTV: Up to 75%
Minimum DSCR: 1.00 (at max. interest rate)
Recourse: Loans are non-recourse with standard “bad boy” carve-outs
Prepayment Options: 1-year lockout, then a 1% prepayment premium or declining prepayment premium
Occupancy Requirements: 85% physical occupancy, 70% economic occupancy
Commercial Space Limits: Commercial space must be no more than 35% of the net rentable area and must produce no more than 20% of the property's income
Eligible Properties: Properties must be stabilized; can include market rate, affordable, student housing, military housing, seniors housing, and manufactured housing community properties
Advantages:
- Competitive interest rates
- Loans are non-recourse
- Requires third-party reports including a property appraisal, property condition assessment, and a Phase I Environmental Assessment
- Requires replacement reserves (minimum of $250/unit per year)
- $12,500 application deposit and $3,000 processing fee required
- 1% origination fee also required
- Does not allow for supplemental financing before conversion to a fixed-rate loan
- Only 30-day rate lock commitments are available
Disadvantages: