How Does Regional Pricing Work for the Freddie Mac SBL Program?
Regional Pricing for Freddie Mac Small Balance Loans
The Freddie Mac Optigo Small Balance Loan program recently changed the way interest rates are determined. In addition to each area being classified as a Top, Standard, Small, or Very Small Market, a new regional pricing system is used, with the U.S. being divided into 5 distinct regions.
Northeast
Delaware, Pennsylvania, New Jersey, New York, Rhode Island, Connecticut, Massachusetts, Vermont, New Hampshire, Maine
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Southeast
Arkansas, Louisiana, Mississippi, Tennessee, Alabama, Georgia, Florida, South Carolina, North Carolina, Virginia, West Virginia, Maryland
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North Central
North Dakota, South Dakota, Nebraska, Kansas, Missouri, Iowa, Minnesota, Wisconsin, Michigan, Illinois, Missouri, Indiana, Ohio, Kentucky
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South Central
Montana, Wyoming, Colorado, New Mexico, Texas, Oklahoma
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Western
Washington, Oregon, Idaho, California, Nevada, Utah, Arizona, Alaska
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Related Questions
What is the Freddie Mac SBL Program?
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. The program offers competitive pricing, less documentation, a streamlined underwriting process, and either hybrid ARM or fixed-rate loan products. Servicers and sellers must 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. For more information, please visit https://www.freddiemac.com/multifamily/product/pdf/small_balance_loan.pdf.
How does regional pricing work for the Freddie Mac SBL Program?
The Freddie Mac Small Balance Loan (SBL) Program offers regional pricing for loans in certain areas. Regional pricing is based on the location of the property and the loan amount. For example, the Southeast region includes Arkansas, Louisiana, Mississippi, Tennessee, Alabama, Georgia, Florida, South Carolina, North Carolina, Virginia, West Virginia, and Maryland. The South Central region includes Montana, Wyoming, Colorado, New Mexico, Texas, and Oklahoma. The Northeast region includes Delaware, Pennsylvania, New Jersey, New York, Rhode Island, Connecticut, Massachusetts, Vermont, New Hampshire, and Maine.
The pricing for each region is listed in the tables below.
Southeast Region:
Loan Amount Pricing $1,000,000 - $2,499,999 +50 bps $2,500,000 - $4,999,999 +25 bps $5,000,000 - $7,499,999 +15 bps $7,500,000 - $9,999,999 +10 bps $10,000,000 - $14,999,999 +5 bps $15,000,000+ +0 bps South Central Region:
Loan Amount Pricing $1,000,000 - $2,499,999 +25 bps $2,500,000 - $4,999,999 +15 bps $5,000,000 - $7,499,999 +10 bps $7,500,000 - $9,999,999 +5 bps $10,000,000 - $14,999,999 +0 bps $15,000,000+ -5 bps Northeast Region:
Loan Amount Pricing $1,000,000 - $2,499,999 +25 bps $2,500,000 - $4,999,999 +15 bps $5,000,000 - $7,499,999 +10 bps $7,500,000 - $9,999,999 +5 bps $10,000,000 - $14,999 What are the benefits of the Freddie Mac SBL Program?
The Benefits and Disadvantages of Freddie Mac Small Balance Loans: Advantages of the Freddie Mac SBL Program
Advantages of the Freddie Mac Small Balance Loan program include:
- Flexible loan sizes, starting at just $750,000 and going up to $7.5 million
- Low interest rates, starting from just 4.51%
- High leverage, up to 80% LTV
- Generous DSCR minimums, as low as 1.20x
- 30-year amortizations, keeping payments low for borrowers
- Partial and full-term interest-only loans offered
- Cash-out refinancing offered for eligible borrowers
- Multiple fixed rate term options (with up to 10-year terms) and hybrid ARM options (with 20-year terms)
- Soft step-down prepayment penalties allowed
- 60-120 day rate commitments offered
- Loans are fully assumable with 1% fee and Freddie Mac approval
- Financing is non-recourse (with individual exceptions for certain loans)
What types of properties are eligible for the Freddie Mac SBL Program?
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
What are the requirements for obtaining a loan through the Freddie Mac SBL Program?
In order to obtain a loan through the Freddie Mac SBL Program, you must meet certain servicer and seller requirements. 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. Additionally, the minimum loan amount for a Freddie Mac SBL Link Loan is $2 million, regardless of the number of units. Compare this to the standard Freddie SBL minimum of $1 million.
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