Why choose Fannie Mae or Freddie Mac for multifamily financing?
September 22, 2021
With numerous options to finance a 5+ unit multifamily property, it can be difficult to determine which program will benefit you the most. Whether you are looking to secure the best rate, maximize the loan amount, or achieve some balance of the two, you should consider Fannie Mae and Freddie Mac's small loan programs.
The key competitive advantages the programs have to offer are:
Non-recourse debt. Fannie Mae and Freddie Mac’s small loan programs are non-recourse, meaning if your property does not perform as expected and you default on your loan, your personal assets are safe. Unless you commit a “bad-boy” act such as fraud, material misrepresentation or omission, intentionally declaring bankruptcy or unpermitted transfers, only your property is at risk, even if the value of the property is less than the outstanding loan amount. Most local banks DO NOT offer non-recourse.
Very competitive rates. When financing a multifamily property, everybody wants the lowest interest rate possible. Fannie Mae and Freddie Mac’s small loan programs typically offer financing at rates that are at or below most other options, including local banks, and especially on higher leverage loans. With Freddie Mac’s Optigo® Small Balance Loan Program, you get the added benefit of your rate being held as soon as you sign a loan application. Both programs also allow for closing within as few as 45 days.
Higher loan amounts. Many local banks will only offer up to 75% LTV, 5-year loan terms, 25-year amortization, no interest-only, and limited prepayment flexibility. Fannie Mae and Freddie Mac’s small loan programs offer up to 80% LTV, up to 30-year loan terms, 30-year amortization, partial-term interest-only, and a variety of flexible prepayment structures. They also offer specialized products including a hybrid arm with an initial 5-, 7-, or 10-year fixed-rate period followed by an adjustable-rate period which provides additional flexibility for paying off or refinancing your loan.
Popularity. Fannie Mae, Freddie Mac, and HUD financing comprise the vast majority of the multifamily mortgage debt outstanding at 50.1% as of 1Q21 – nearly twice the next closest segment which is bank and thrift. Why not benefit from the most popular lending programs amongst institutional multifamily investors – especially since Fannie Mae and Freddie Mac offer products and terms specifically tailored towards the needs of small loan borrowers like you.
Below is a summary of the terms offered by Fannie Mae and Freddie Mac’s small loan programs:
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With nearly 15 years of experience in finance, commercial real estate, and multifamily lending, Chris leads our MultiFi team to provide the best solutions tailored to your unique situation and goals. Chris and the MultiFi team have set out to create the future of multifamily lending, striving to empower borrowers like you with the knowledge, transparency, and expertise to get more out of your multifamily investment.
Prior to launching MultiFi, Chris was responsible for the initial underwriting and quoting of over $26 billion of potential Fannie Mae multifamily production. Chris was also instrumental in launching Berkadia’s Fannie Mae's Small Loans program and Freddie Mac’s Optigo® Small Balance Loans Program. He served as Head of Small Loan Originations, where he managed over $575 million in small loan production, in conjunction with being the Product Manager for Berkadia's multifamily lending technology initiative. Chris's unmatched experience with multifamily financing and innovation gives MultiFi an edge in providing you with the optimal solutions and experience.Read more by Chris Philipps