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)

Disadvantages of the Freddie Mac SBL Program

• Loans are generally only available for standard multifamily properties; the program does not allow properties with a 50% or more concentration of student or military housing, Section 8 properties with below-market rents, LIHTC properties still in their compliance period, and a variety of other housing types
• Requires significant third-party reports, including a Freddie Mac Multifamily Appraisal, a Property Condition Report, and a Phase I Environmental Assessment
• Freddie Mac requires an application fee of $4,500 for Top Markets) and $8,500 for Standard Markets
• Leverage and DSCR requirements become significantly stricter in small and very small markets (1.30x and 1.40x DSCR, respectively, and between 70-75% LTV)
• Certain limits on subordinate financing
• Replacement reserves of up to $300/unit are often required

Related Questions

What are the eligibility requirements for the Freddie Mac SBL Program?

The eligibility requirements for the Freddie Mac SBL Program include:

• Property requirements
• Servicer & Seller Requirements
• Collateral
• Rigorous assessment
• B-piece purchase
• Loss sharing
• Repurchasing of delinquent SBLs
• Origination of at least $50 million per quarter

For more information, please refer to the Freddie Mac SBL Program Guidelines.

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 advantages of the Freddie Mac SBL Program compared to other financing options?

The advantages of the Freddie Mac SBL Program compared to other financing options 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 are the disadvantages of the Freddie Mac SBL Program?

The Disadvantages of Freddie Mac Small Balance Loans include:

• Loans are generally only available for standard multifamily properties; the program does not allow properties with a 50% or more concentration of student or military housing, Section 8 properties with below-market rents, LIHTC properties still in their compliance period, and a variety of other housing types
• Requires significant third-party reports, including a Freddie Mac Multifamily Appraisal, a Property Condition Report, and a Phase I Environmental Assessment
• Freddie Mac requires an application fee of $4,500 for Top Markets and $8,500 for Standard Markets
• Leverage and DSCR requirements become significantly stricter in small and very small markets (1.30x and 1.40x DSCR, respectively, and between 70-75% LTV)
• Certain limits on subordinate financing
• Replacement reserves of up to $300/unit are often required

What are the typical loan terms for the Freddie Mac SBL Program?

The Freddie Mac Small Balance Loan (SBL) program offers apartment financing in amounts between $1 million and $7.5 million. Loan terms typically include:

• Loan Sizing: $1 million minimum, $7.5 million maximum
• Uses: Purchases or refinances of stabilized multifamily properties
• Amortization: Up to 30 years
• Maximum LTV: 80% for Top and Standard Markets, 75% LTV for purchases and up to 70% for refinances in Small/Very Small Markets
• Minimum DSCR: 1.20x for Top Markets, 1.25x for Standard Markets, 1.30x for Small Markets, 1.40x for Very Small Markets
• Recourse: Loans are typically non-recourse with standard carve-outs
• Terms: 20-year hybrid adjustable-rate loan with a 5, 7, or 10-year initial fixed-rate period, or a 5-, 7-, or 10-year fixed-rate loan (partial and full-term interest-only loan options are also available)
• Borrower Requirements: Borrowers usually need a net worth of at least 100% of the loan amount and liquidity equal to 10% of the loan amount (adjustable based on various factors)
• Timing: Closing generally occurs 45 to 60 days after application

For more information, please visit https://www.multifamily.loans/apartment-finance-blog/freddie-mac-sbl-program/ and https://apartment.loans/freddie-mac/.