Freddie Mac Tax-Exempt Financing

Loans for the Acquisition or Refinancing of Affordable Multifamily Properties Insured by Freddie Mac

FRMC Tax-Exempt Loans

Financing the acquisition, renovation, and refinancing of properties with 4% Low-Income Housing Tax Credits (LIHTC) credits with at least 7 years remaining in the LIHTC compliance period is made much more attractive when investors choose a Freddie Mac Tax-Exempt Loan. With up to 30-year terms for fixed-rate loans, up to 10-year terms for variable-rate loans, and amortizations of up to 30 years, these loans can help borrowers save time and money when compared to traditional bond credit enhancements. Additionally, these loans offer maximum LTV allowances of up to 90% of an asset's market value with DSCRs as low as 1.15x for fixed-rate financing, and LTVs of up to 85% with DSCRs as low as 1.20x for floating-rate loans. Eligible mixed-use properties and permit subordinate financing are both supported under the program, making it an incredibly flexible tool for affordable property developers and investors.

2021 Sample Freddie Mac Terms For Tax-Exempt Loans

Size: Varies based on LTV and DSCR requirements.

Use: Financing for the acquisition or refinance of stabilized affordable multifamily properties with 4% Low-Income Housing Tax Credits (LIHTC) with at least 7 years remaining in the LIHTC compliance period.

Terms:

Fixed-rate, floating-rate, and fixed-to-floating rate options, the minimum loan term is typically 7 years. Maximum terms include:

  • Fixed-rate loans: Up to 30 years
  • Floating-rate loans: Up to 10 years
  • Construction loans: Up to 36-months

Interest Rate:

  • Fixed-rate loans: Priced on a spread to 10-year Treasuries
  • Floating-rate loans: Based on 30-day SIFMA or 1-month LIBOR index

Amortization: Up to 35 years

Maximum LTV:

  • Fixed-rate loans: 85% of adjusted value or 90% of market value
  • Floating-rate loans: 80% of adjusted value or 85% of market value with interest rate hedge

Minimum DSCR: 1.15x for fixed-rate, 1.20 for floating-rate, with interest rate hedge

Prepayment Penalty: Minimum 10 years prepayment protection, then typically yield maintenance

Subordinate Loans: Permitted, supplemental financing not available

Timing: Loans typically take between 75 and 90 days to close, with some lenders closing in as little as 30 days

Assumability: Loans are assumable with lender approval and a 1% fee

Advantages:

  • Avoids the risk and hassle of bond issuing
  • Interest-only loan options
  • Eligible mixed-use properties supported
  • Immediately funding and forwards
  • Subordinate financing allowed
  • Fixed, floating, and float-to-fixed rate options
  • Freddie Mac GAP financing may be available
  • Rate locks available after commitment (early rate locks may also be available)

Disadvantages:

  • Appraisal, Phase I Environmental Report, Physical Needs Assessment, Zoning, and Moisture Management reports are required; a Seismic Report may be required for properties in Seismic Zones 3 and 4
  • Application fees, commitment fees, and other fees required
  • Replacement reserves required
  • No supplemental loans allowed
  • 2% rate lock fee typically required (refunded after property reaches stabilization)
  • Freddie Mac fee of $2,000 or 0.1% of the loan amount (whichever is larger) also typically required