Uses:

• Forward Commitment: Provides bond credit enhancement for LIHTC properties post-construction or substantial rehab
• Immediate Funding: For the acquisition, refinancing, or credit substitution of LIHTC properties
• Preservation Rehabilitation: Intended for properties with tenants in place undergoing moderate rehabilitation

Terms:

• Forward Commitment and Immediate Funding:
• Minimum term: Remaining LIHTC compliance period or 15 years, whichever is less
• Maximum term: 35 years
• Preservation Rehabilitation:
• Minimum term: Remaining LIHTC compliance period or 15 years, whichever is less
• Maximum term: 35 years

*Rehabilitation/stabilization period (24 months maximum) is included in the loan term for preservation rehabilitation

Amortization: Up to 35 years

Interest Rate: Fixed and floating-rate options available

Interest-Rate Caps: Required

Maximum LTV/Minimum DSCR:

• Variable-rate with cap hedge: 80% of adjusted value or 85% of market value/1.20x
• Fixed-rate: 85% of adjusted value or 90% of market value/1.15x

Eligible Properties:

• Forward Commitment: To-be-built or substantially rehabilitated garden, mid-rise, or high-rise properties with 4% LIHTC
• Immediate Funding: Garden, mid-rise, or high-rise properties with 4% LIHTC (must maintain 90% occupancy for 90 days, and at least 7 years must be remaining in LIHTC compliance period)
• Preservation Rehabilitation: Garden, mid-rise, or high-rise properties with 4% LIHTC undergoing moderate rehabilitation with tenants in place

Construction Loans: Maximum forward commitment term of 36 months plus a free 6-month extension during the construction period

Prepayment Penalty: Fee maintenance

Specific Funding Information:

• Forward Commitment:
• Bond credit enhancement is available during the construction phase (funded forward commitment)
• A letter of credit collateral is required during the construction phase
• Forward commitment to provide bond credit enhancement is available upon successful conversion of the property from the construction phase to the permanent phase (unfunded forward commitment)
• Immediate Funding: Bond credit enhancement for fixed- or variable-rate tax-exempt bonds
• Preservation Rehabilitation:
• Bond credit enhancement for acquisition/rehabilitation is based on projected post-rehabilitation net operating income (NOI)
• Cash or letter of credit collateral is needed to fund the gap between supportable debt on the current NOI and the bond mortgage loan amount (collateral held until stabilization)
• Interest-only financing is available during the rehabilitation/stabilization period

Advantages:

• Subordinate financing permitted
• Eligible mixed-use properties supported
• Deals with new 4% or 9% LIHTC can be underwritten to DSCRs as low as 1.15x

Disadvantages:

• Application fee, commitment fee, credit facility fee, and other fees are required
In this article:
1. Freddie Mac Bond Credit Enhancement Loans for the Acquisition, Refinancing, or Credit Substitution of Low-Income Housing Tax Credit (LIHTC) Properties
2. 2021 Sample Freddie Mac Terms For Bond Credit Enhancement with 4% LIHTC
3. Get Financing