The Freddie Mac Small Balance Loan (SBL) Program is a loan program designed to assist small business owners in securing liquidity for their investments. It offers a platform dedicated to selling loans for smaller rental properties, with loans ranging from $1 million to $7.5 million. Some of the key benefits and features of the program include a simplified pricing process, a simplified SBL insurance assessment, less documentation, a reduction in due diligence requirements, easier third party reporting, and competitive pricing. Servicers and sellers must also meet a specific set of guidelines, including collateral, undergoing a rigorous assessment, B-piece purchase, loss sharing, repurchasing of delinquent SBLs and origination of at least $50 million per quarter.

Eligible Property Types for the Freddie Mac SBL Program include multifamily and apartment properties with five or more units. This includes:

• Properties with commercial space that does not comprise more than 25% of the property’s gross income
• Independent living properties for seniors without resident services
• LIHTC (Low Income Housing Tax Credits), with land restrictions in the extended use period or the final 24 months of the initial restriction period (to qualify, eligible LIHTC properties must have 75 units or less and get special Freddie Mac approval)
• Other regulatory restrictions that limit income/rent (funds must be disbursed)
• Tax abatement properties
• Tenant-based housing voucher properties
• Buildings can have local rent subsidies for 10% or less units, as long as tenant eligibility certification is not required
• Cooperatives (must be located in New York City or Long Island)

In contrast, properties that are ineligible for the SBL program include:

• LIHTC properties with more than 24 months left on their Land Use Restrictive Agreement
• Tax-exempt bonds Interest Reduction Payments (IRPs)
• Properties with a greater than 50% concentration of student or military housing
• Properties with Section 8 contractors or other project-based HAP contracts
• Master lease HTC (Historic Tax Credit) properties

The Freddie Mac SBL Program offers a number of benefits for affordable properties, including a simplified pricing process, a simplified SBL insurance assessment, less documentation, a reduction in due diligence requirements, and easier third party reporting. Additionally, the program offers competitive pricing, a streamlined underwriting process, and either hybrid ARM or fixed-rate loan products.

Some affordable properties are eligible for the program, while others are not. Eligible properties include those with income/rent restrictions occurring as a result of local laws/regulations, properties with less than half of leases guaranteed by a legitimate non-profit with a minimum of 36 months of experience in low-income housing, properties with tax abatements, and properties with market-level Section 8 tenant vouchers.

Ineligible properties include all properties owned by non-profit borrowers, Housing Assistance Payment (HAP) contract properties, properties involving rental/income restrictions or a regulatory agreement on the property’s title, and LIHTC deals (both 4% or 9%) with a Land Use Regulatory Agreement (LURA) currently in place (generally including properties in their extended use period).

The Freddie Mac SBL Program has specific requirements for affordable properties. In addition to the property requirement, servicers and sellers must also meet a specific set of guidelines. These include collateral, undergoing a rigorous assessment, B-piece purchase, loss sharing, repurchasing of delinquent SBLs and origination of at least $50 million per quarter.

Eligible property types for the Freddie Mac SBL Program include multifamily and apartment properties with five or more units. This includes:

• Properties with commercial space that does not comprise more than 25% of the property’s gross income
• Independent living properties for seniors without resident services
• LIHTC (Low Income Housing Tax Credits), with land restrictions in the extended use period or the final 24 months of the initial restriction period (to qualify, eligible LIHTC properties must have 75 units or less and get special Freddie Mac approval)
• Other regulatory restrictions that limit income/rent (funds must be disbursed)
• Tax abatement properties
• Tenant-based housing voucher properties
• Buildings can have local rent subsidies for 10% or less units, as long as tenant eligibility certification is not required
• Cooperatives (must be located in New York City or Long Island)

In contrast, properties that are ineligible for the SBL program include:

• LIHTC properties with more than 24 months left on their Land Use Restrictive Agreement
• Tax-exempt bonds Interest Reduction Payments (IRPs)
• Properties with a greater than 50% concentration of student or military housing
• Properties with Section 8 contractors or other project-based HAP contracts
• Master lease HTC (Historic Tax Credit) properties

The advantages of using the Freddie Mac SBL Program for affordable properties include a simplified pricing process, a simplified SBL insurance assessment, less documentation, a reduction in due diligence requirements, easier third party reporting, and better pricing. Additionally, the program offers competitive pricing, less documentation, a streamlined underwriting process, and either hybrid ARM or fixed-rate loan products.