Non-Recourse Freddie Mac SBL Loans
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If a loan is non-recourse and a borrower defaults, a lender cannot pursue a borrower’s personal assets in order to repay the outstanding balance of the loan. However, most non-recourse loans come with “bad-boy” carve-out provisions, which make the loan recourse if the borrower commits certain “bad acts,” such as embezzlement, fraud, or the intentional declaration of bankruptcy. Most, but not all Freddie Mac Multifamily loans are non-recourse. In regards to the Freddie Mac SBL program, the vast majority of loans are non-recourse with bad-boy carve-outs, though certain loans, especially interest-only loans in smaller markets, may carry some recourse.
Related Questions
What are the benefits of a non-recourse Freddie Mac SBL loan?
The benefits of a non-recourse Freddie Mac SBL loan include competitive pricing, less documentation, a streamlined underwriting process, and either hybrid ARM or fixed-rate loan products. Additionally, the program offers a simplified pricing process, a simplified SBL insurance assessment, less documentation, a reduction in due diligence requirements and easier third party reporting. Source
What are the requirements for a non-recourse Freddie Mac SBL loan?
The requirements for a non-recourse Freddie Mac SBL loan include collateral, undergoing a rigorous assessment, B-piece purchase, loss sharing, repurchasing of delinquent SBLs and origination of at least $50 million per quarter. Additionally, most non-recourse loans come with “bad-boy” carve-out provisions, which make the loan recourse if the borrower commits certain “bad acts,” such as embezzlement, fraud, or the intentional declaration of bankruptcy. Most, but not all Freddie Mac Multifamily loans are non-recourse. In regards to the Freddie Mac SBL program, the vast majority of loans are non-recourse with bad-boy carve-outs, though certain loans, especially interest-only loans in smaller markets, may carry some recourse.
What is the maximum loan amount for a non-recourse Freddie Mac SBL loan?
The maximum loan amount for a non-recourse Freddie Mac SBL loan is $7.5 million, according to this source.
What is the interest rate for a non-recourse Freddie Mac SBL loan?
The interest rate for a non-recourse Freddie Mac SBL loan depends on the market size and region. Right now (July 2019), interest rates for Freddie Mac Small Balance Loans range from 4.08% to 5.16%. We have broken down rates by region and market size below:
Market Size Region Interest Rate Top Northeast 4.08% Top Midwest 4.08% Top South 4.08% Top West 4.08% Standard Northeast 4.58% Standard Midwest 4.58% Standard South 4.58% Standard West 4.58% Small Northeast 4.83% Small Midwest 4.83% Small South 4.83% Small West 4.83% Very Small Northeast 5.16% Very Small Midwest 5.16% Very Small South 5.16% Very Small West 5.16% In addition, pricing is further broken down by region, as Freddie Mac has divided the U.S. into 5 distinct regions for the purposes of SBL pricing. Interest-only periods can generally be added or subtracted for a 0.4% addition or subtraction per year. For instance, a borrower with a 5-year fixed-rate loan with a 5% interest rate could extend their I/O period to 2 years, but to do so, they would need to pay an elevated interest rate of 5.4%.
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What is the repayment term for a non-recourse Freddie Mac SBL loan?
The repayment term for a non-recourse Freddie Mac SBL loan is typically 5, 7, or 10 years. According to Apartment.Loans, most non-recourse loans come with “bad-boy” carve-out provisions, which make the loan recourse if the borrower commits certain “bad acts,” such as embezzlement, fraud, or the intentional declaration of bankruptcy. Additionally, according to Multifamily.Loans, the Freddie Mac SBL program offers loans that range from $1 million to $7.5 million with repayment terms of 5, 7, or 10 years.