Freddie Mac Floating-Rate Loans are available for:

• Standard multifamily housing properties
• Manufactured housing communities
• Seniors housing developments
• TAH properties, including cash LIHTC Year 4-10 and 11-15 and Section 8 loans

Note: 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 (LLCs)
• For loans of more than $5 million, the borrower must be a single purpose entity (SPE) while for loans of $5 million or less, the borrower may be a single asset entity (SAE)
• For TICs, there must be no more than 10 tenants in common, and each must be an SPE

Maximum LTV/Minimum Debt Service Coverage Ratio (DSCR):

• 5- to 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 the first year, 2% penalty in the second 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)

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

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

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 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 nonrecourse
• 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, and 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 the loan amount ― whichever is larger ― for conventional first mortgages, $5,000 or 0.15% of the loan amount ― whichever is larger ― for seniors housing, $3,000 or 0.1% of the loan amount ― whichever is larger ― for TAH loans
• Typically requires a loan origination fee
• Typically requires between $8,000 and $12,000 in legal fees
• Lender application fees also required, at an average of $15,000, including third-party reports, but may vary based on the specific lender
• 2% rate lock fee usually required, which is refunded after Freddie Mac purchases loan, usually around 30 days post-closing

In this article:

1. Floating-rate Loans for Acquiring and Refinancing Multifamily Developments Insured by Freddie Mac
2. Sample Freddie Mac Terms for Floating-Rate Loans
3. Get Financing