Frequently asked questions
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Loan programs
What is an “agency” lender or “GSE”?
The Federal National Mortgage Association (FNMA), and the Federal Home Loan Mortgage Corporation (FHLMC), also known as Fannie Mae and Freddie Mac, respectively, are commonly referred to as “agency” lenders. Both are government-sponsored enterprises (GSEs) created by Congress to provide liquidity, stability, and affordability to the single-family and multifamily mortgage market.
Is MultiFi a direct lender?
Yes, MultiFi is a dedicated platform formed by Berkadia®, a leader in the commercial real estate industry and an approved Fannie Mae DUS® and Freddie Mac Optigo® Small Balance Loan Lender. Our dedicated team of MultiFi partners has a deep understanding of where the Fannie Mae and Freddie Mac small loan programs can be flexible to meet your unique situation. The strength of our partnerships ensures you are getting optimal rates and credit terms. Additionally, there is no extra layer of fees from the use of a broker.
Does MultiFi offer loans in my state?
Yes, MultiFi provides access to Fannie Mae Small Loan and Freddie Mac Small Balance Loan (SBL) programs which are available nationwide. Our dedicated team of MultiFi partners is backed by the experience of closing over 200 multifamily small loans totaling over $600MM across 40+ states.
When can I lock my rate?
With Fannie Mae's Small Loan program, a portion of the rate is not locked until the due diligence period is completed, approximately 30-60 days from the receipt of an executed loan application.
Freddie Mac Optigo Small Balance Loans (SBL) rates are held as of the date of an executed loan application provided that a full due diligence package is delivered to Freddie Mac within 35 business days.
Do you offer supplemental loans?
Yes, supplemental loans are available through the Fannie Mae Small Loan program for properties with an existing Fannie Mae loan.
Who will service my loan?
Berkadia will service your loan. Berkadia is the largest non-bank commercial loan servicer in the industry and has earned the highest primary servicer ratings from Fitch, Standard & Poor’s, and Morningstar.
Are Fannie Mae Small Loans and Freddie Mac Optigo Small Balance Loans (SBL) programs requiring debt service reserves due to COVID-19?
Both Fannie Mae Small Loans and Freddie Mac Optigo Small Balance Loans (SBL) programs are no longer requiring COVID-19 debt service reserves (DSRs).
What are the advantages of getting a loan through the Fannie Mae Small Loans and Freddie Mac Optigo Small Balance Loans (SBL) programs compared to my local bank?
- More competitive terms that can include higher leverage, longer amortization periods, greater interest only periods, and lower rates
- Comparable products (fixed-rate and hybrid ARM loans) with flexible prepayment structures (declining prepayment and shortened yield maintenance periods available)
- Non-recourse (with standard carve outs). Most local banks are full recourse.
- Longer loan terms available (up to 30 years). Local banks generally prefer not to exceed 5 years
- Consistent loan programs and terms available nationwide. Local banks are typically limited geographically and offer unique lending programs with varying terms.
- No obligation to open a bank account requiring you to maintain a minimum balance, tying up capital that could be used for other purposes
What are the unique competitive advantages of the Fannie Mae Small Loans and Freddie Mac Optigo Small Balance Loans (SBL) programs?
- Offers up to 30-yr fixed rate options (10-yr fixed rate is maximum fixed-rate loan term for Freddie Mac SBL)
- Supplemental financing available (not available for Freddie Mac SBL)
- Manufactured Housing Community (MHC) is an eligible property type (ineligible for Freddie Mac SBL)
- Greater control/flexibility with underwriting and closing timeframe
- Greater interest only may be available on longer-term loans than Freddie Mac SBL, as well as higher LTVs with lower minimum DSCRs in secondary and tertiary markets
- Hybrid ARM: 30-yr maximum terms and no prepayment penalties during adjustable-rate period (20-yr max term and 1% prepayment penalty during adjustable-rate period for Freddie Mac SBL hybrid ARMs, although 1% penalty is waived if loan is refinanced with Freddie Mac SBL)
- Allows a higher concentration of student or military tenants than Freddie Mac SBL
- Allows certain fractured condominium properties and properties with private wells or septic (ineligible for Freddie Mac SBL)
- Rate held at application (typically rate is not locked until 30-60 days after executing a loan application for Fannie Mae Small Loan loans)
- 1.20x min DSCR in Top Markets (vs. 1.25x for Fannie Mae Small Loans unless loan meets certain criteria)
- Typically more interest only available than Fannie Mae Small Loans on shorter-term loans
- Competitive 5-yr hybrid ARM product (not offered by Fannie Mae Small Loans)
- Hybrid ARM rates generally better than Fannie Mae Small Loans hybrid ARM rates
- Higher maximum loan amount ($7.5MM vs. $6MM for Fannie Mae Small Loans)
- No 0.10% Application fee in Top Markets (Fannie Mae Small Loans 0.10% delivery fee in all markets)
- Declining prepayment options typically cheaper (less of an impact to the rate) than Fannie Mae Small Loans
Why might the Fannie Mae Small Loans and Freddie Mac Optigo Small Balance Loans (SBL) programs be a better option than Fannie Mae and Freddie Mac’s conventional (larger loan) loan programs?
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Streamlined 3rd party reports (streamlined Property Condition Assessments (PCA) and environmental screening vs. full PCA and Phase 1 required for the conventional programs)
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Lower closing costs and upfront deposit
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Tailored loan products and features, such as the hybrid ARM and declining prepayment
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Freddie Mac SBL will hold rate at application at no additional cost
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80% LTV/1.20x is standard for acquisitions and cash-neutral refinances in top markets (1.20x not typically achievable through conventional programs)
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Reduced ongoing servicing requirements (annual financials and operating statements vs. quarterly for the conventional programs)
Can I get a pre-qualification or pre-approval?
Unlike the process for purchasing a single-family residence, there is no pre-qualification or pre-approval provided for the Fannie Mae Small Loans or Freddie Mac Optigo Small Balance Loans (SBL) programs. A loan application, or term sheet, is issued after the Lender has conducted a preliminary review of you as the borrower, the property, and requested loan terms.
What is the origination process?
At a high level, the origination process for a Fannie Mae Small Loans and Freddie Mac Optigo Small Balance Loans (SBL) programs available through MultiFi is as follows:
- Obtain indicative loan terms by providing basic property information and discussing your unique situation and goals with an expert MultiFi partner
- Get quotes by providing additional information and property documents (see here)
- Select a quote and execute a loan application summarizing the agreed upon loan terms
- Provide necessary due diligence for your loan to be underwritten and approved by the lender as well as Freddie Mac or Fannie Mae (if necessary)
- Execute a loan commitment confirming your final loan terms
- Lock your rate and close your loan
What are the approximate origination costs?
Typically, there is a minimum origination fee equal to 1.00% of the loan amount plus approximately $17,000-$18,000 in lender closing costs based on Fannie Mae and Freddie Mac small loan program requirements.
Fannie Mae Small Loans | Freddie Mac SBL | |
Delivery/ Application Fee1 | $2,000 | $2,000 |
Lender Legal Fees | $6,900 | $6,075 |
Appraisal | $3,800 | $3,800 |
PCA/ESA2 | $2,900 | $2,900 |
Zoning Report | $800 | $800 |
Insurance Review Fee | $1,450 | $1,450 |
Credit Reports | $80 | $80 |
Site Inspection Costs | $500 | $500 |
Est. Lender Closing Costs3 | $18,430 | $17,605 |
- Delivery Fee equal to 0.10% of the loan amount for Fannie Mae Small Loans and Application fee equal to 0.10% of the loan amount for Freddie Mac SBL except in Top Markets; assuming $2.0MM average loan size and Standard market
- Streamline PCA and Environmental Screening for Fannie Mae Small Loans; Form 1104 for Freddie Mac SBL
- Excludes origination fee (if applicable) as well as recording fees, title costs and survey which you typically pay for directly
Can I request modifications to the loan documents?
Fannie Mae Small Loans and Freddie Mac Optigo Small Balance Loans (SBL) programs typically do not allow any modifications to their loan documents. This ensures a streamlined process and helps keep lender legal fees as low as possible.
How long does it take to close a loan?
The average application to closing timeline is typically 60-70 days. However, if third-party reports are expedited and all due diligence is provided in a timely manner, it may be possible to close within as few as 45-55 days.
Property
Does MultiFi offer loans for vacant land, single-family homes, duplexes, triplexes, or quadplexes?
What property types are eligible?
- Properties with certain tax abatements
- Properties with short-term rentals, subject to a percentage of the total unit count
- Properties with micro-units equal to or less than 350 SF, subject to a percentage of the total unit count
- Seniors housing with no resident services
- Properties with commercial (non-residential) space or commercial income, subject to a percentage of the total space and income
- Properties with no more than 50% student, military, or single employer concentration
- Properties with tenant-based rental assistance
- Properties with no more than 20% of the units encumbered by a HAP contract
- Properties subject to affordability restrictions and/or tax credits lasting no more than two years
- Properties with a Master Lease concentration comprising no more than 25% of the total gross potential rent (GPR)
- Non-contiguous parcels so long as each parcel has buildings with 5 or more units that meet occupancy requirements and are located within the same MSA
- Properties with buildings that have less than 5 units as long as they are located on the same or contiguous parcels
- Properties with private wells and/or septic tanks if common in the market
- Fractured condominiums (subject to controlling a minimum percentage of the condominium association)
- Manufactured Housing Communities (MHCs)
- Properties with scenario expected loss (SEL) of less than or equal to 40%
Does MultiFi offer HUD loans such as the FHA 221(d)(4) or 223(f), construction financing, or bridge loans?
How are “stabilized” properties defined by Fannie Mae and Freddie Mac?
What is a property’s “affordability” and how is it factored into my loan terms?
- Current rent roll (download our template)
- Trailing 12-month operating statement (download our template)
- Property operating budget
Additionally, having the following information and documents available can help expedite the process and address potential issues before they arise:
Borrower related:- Ownership structure and percentages
- Borrower(s) bio/resume
- Estimated net worth, liquidity, and FICO scores of borrower(s)
- Borrower(s) schedule of real estate owned (SREO)
- Third-party property manager information (if applicable)
- Commercial (i.e., retail or office) rent roll (if applicable)
- Physical occupancy (trailing 12 months)
- Cost basis, existing loan amount, and anticipated closing costs such as prepayment penalties (if refinance)
- Details on recent or planned capital improvements (if available)
- Interior/exterior property photos
- Offering memorandum (if available)
- Student, military, or other tenancy concentrations (if applicable)
- Property-based rent and/or affordability restrictions
- Other unique property characteristics such as tax abatements, short-term rentals, micro-units, or residential services such as those provided for certain types of seniors housing.
Does crime at or within the surrounding area of the property impact my terms?
Part of Fannie Mae and Freddie Mac's mission is to provide safe housing for individuals, families and communities. Therefore, crimes committed at your property or within the surrounding area are taken into account. Incidents of violent or drug-related crimes could also have a material impact on property operations in addition to creating headline and securitization risk. Fannie Mae and Freddie Mac also consider “patterns of lesser crime” such as car break-ins and domestic incidents. If crime has been an issue within the past 5 years, you will need to explain how it has been addressed with measures such as adding a security gate or fence around the perimeter of the property, security patrol, or cameras as well as confirming their effectiveness.
How does property condition factor into my loan terms?
Your property should be well-maintained with limited deferred maintenance. Fannie Mae and Freddie Mac take into consideration the condition of a property to determine the amount of replacement reserves that you will need to support the property annually. In general, properties eligible for Fannie Mae Small Loans and Freddie Mac Optigo Small Balance Loans (SBL) programs will need to set aside $200-$300/unit on an annual basis in replacement reserves. For example, a 10-unit apartment building would likely have to allocate $2,000 to $3,000 each year for replacement reserves.
Borrower
Are the loans offered by MultiFi non-recourse?
Yes, the Fannie Mae Small Loans and Freddie Mac Optigo Small Balance Loans (SBL) programs available through MultiFi are non-recourse with standard carve-outs. This means only the collateral (your multifamily property) is at risk in the event of default, thereby protecting your other personal assets. Standard carve-outs convert the loan to full recourse in the event of any “bad-boy” acts such as fraud, material misrepresentation or omission, intentionally declaring bankruptcy, or unpermitted transfers.
Many borrowers find non-recourse debt to be especially important when there are partners involved. Non-recourse prevents you from having to sign a personal guarantee when you are not the only key decision maker or lack full control.
What ownership structures are eligible?
The following ownership structures are permitted by the Fannie Mae Small Loans and Freddie Mac Optigo Small Balance Loans (SBL) programs:
- Individual
- Single asset entity (typically in the form of an LLC)
- Multiple asset entity (with conditions; typically in the form of an LLC)
- Revocable and irrevocable trusts (with conditions)
- General partnership
- Corporation
- Real estate investment trust (REIT)
- Tenancy-in-Common (TIC) with five or fewer members
- Not-for profit corporations (with conditions)
- Funds
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Series LLCs
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Transactions with in-place Hard Preferred Equity or Subordinate Debt
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Land Trusts/Delaware Statutory Trusts
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Pension or Retirement Accounts
What is the minimum required net worth and liquid assets?
To qualify for Fannie Mae Small Loans and Freddie Mac Optigo Small Balance Loans (SBL) programs, individual borrowers or key principals must have combined net worth that equals or exceeds 1x the desired loan amount and liquidity equal to at least 9 monthly payments of principal and interest, or generally ~5-10% of the desired loan amount.
What is the minimum required FICO score?
If the borrower is an individual, a FICO score of 680 or better is typically required. Some flexibility may be available if there are multiple key principals.
How much prior experience owning and/or operating multifamily properties do I need to have?
The Fannie Mae Small Loans and Freddie Mac Optigo Small Balance Loan (SBL) programs generally require individual borrowers or at least one key principal to have 2-5 years of experience owning or managing at least 1 multifamily property that is similar in size to the property being financed. Certain waivers or exceptions may be considered.
Do I need to be a US citizen to qualify?
Individual borrowers or key principals must either be a citizen residing in the United States, a permanent legal resident of the United States, or an individual meeting specific foreign key principal requirements. If an entity is requesting the loan, it must be organized in the United States.
If I have a felony, could I still qualify?
Fannie Mae and Freddie Mac rarely lend to individual borrowers or key principals with past litigation or criminal records related to finances. Guarantors must not be involved in any criminal activity including bankruptcy, foreclosure, deed in lieu of foreclosure, or other liquidation proceeding.
Are there any limitations on how far away a property can be located from me?
Glossary of terms
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