Assumability for Freddie Mac Small Balance Loans

Program update, July 2026

What changed. Freddie Mac retired the Small Balance Loan program on April 15, 2026 and folded small-balance lending into its conventional platform. New loans are originated as Conventional Small: $2 million to $10 million, up to 80% LTV, 1.25x minimum debt coverage, properties of 50 units or fewer. The practical effect is that Freddie no longer has a small-balance product below $2 million. The guidance on this page describes SBL as it operated before that change, and remains useful for understanding loans already in place.

What you can still do. Small-balance agency financing did not go away. Fannie Mae's Small Mortgage Loan program is still open, lends up to $9 million on five or more units, and is often the better execution on smaller deals. Below the agency minimums, or where the property or the timeline does not fit an agency box, the desk also places bank, CMBS, bridge, life company, and HUD/FHA debt. See Freddie Mac apartment loans for current agency terms, or tell us about the deal and we will size it across every execution that fits.

Assumability in Relation to the Freddie Mac SBL Program

If a commercial or multifamily loan is assumable, it can be transferred to a new borrower, allowing the current owner to avoid prepayment penalties. It can also make the property easier to sell, as the new borrower will not have to pay most of the costs of taking out a new loan. However, if the loan is already several years into its term, assuming a loan may require the new borrower to make a sizable down payment in order to acquire the property, which they may or may not be willing to do.

In regards to the Freddie Mac SBL program, all Optigo Small Balance Loans are fully assumable with lender approval and a 1% fee.

What are the benefits of assumability for Freddie Mac Small Balance Loans?

The Freddie Mac SBL program offers a variety of benefits for assumable loans, including the ability to avoid prepayment penalties and the need to order new third-party reports. Additionally, assumable loans can make the property easier to sell, as the new borrower will not have to pay most of the costs of taking out a new loan. Furthermore, assumable loans can provide a great exit option in the first few years of a commercial mortgage, when prepayment penalties are high and the new borrower won’t have to contribute an unreasonably high down payment to assume the loan.

In regards to the Freddie Mac SBL program, all Optigo Small Balance Loans are fully assumable with lender approval and a 1% fee.

What are the requirements for assumability of Freddie Mac Small Balance Loans?

Freddie Mac Small Balance Loans are fully assumable with lender approval and a 1% fee. This is ideal for borrowers, as they can simply pass on the loan to the next owner of the building, instead of paying a prepayment penalty. The new owner will not need to go through the entire loan approval process from scratch, and won’t have to order new third-party reports, such as an Appraisal or a Phase I Environmental Assessment.

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What are the advantages of assumability for Freddie Mac Small Balance Loans?

The advantages of assumability for Freddie Mac Small Balance Loans include:

Lender approval and a 1% fee
Avoidance of prepayment penalties
No need to go through the entire loan approval process from scratch
No need to order new third-party reports, such as an Appraisal or a Phase I Environmental Assessment

Source: https://apartment.loans/posts/are-freddie-mac-small-balance-loans-assumable/ and https://apartment.loans/posts/assumability/

How does assumability of Freddie Mac Small Balance Loans affect the borrower?

The fact that Freddie Mac Small Balance Loans are assumable is beneficial for borrowers, as they can pass on the loan to the next owner of the building, instead of paying a prepayment penalty. This can also be beneficial for a new owner, as they will not need to go through the entire loan approval process from scratch, and won’t have to order new third-party reports, such as an Appraisal or a Phase I Environmental Assessment.

Not all new owners will want to assume a loan, especially if interest rates have fallen, or if the loan is already a few years into its term (as this will greatly increase the down payment the new owner will have to provide). However, assumable loans (like the Freddie Mac Optigo Small Balance Loan) give a borrower a fantastic exit option in the first few years of a commercial mortgage, when prepayment penalties are high and the new borrower won’t have to contribute an unreasonably high down payment to assume the loan.

Source: https://apartment.loans/posts/assumability/ and https://apartment.loans/posts/are-freddie-mac-small-balance-loans-assumable/

What are the risks associated with assumability of Freddie Mac Small Balance Loans?

The main risk associated with assumability of Freddie Mac Small Balance Loans is that the new borrower may not be able to make a large enough down payment if the loan is already several years into its term. This could make it difficult for the new borrower to acquire the property. Additionally, the new borrower may not be willing to assume the loan if interest rates have fallen since the loan was taken out.