Agency Loans (FNMA)
Fannie Mae Multifamily Mortgages
The Fannie Mae Multifamily Loan Program is one of the most-utilized funding resources for apartment owners, nationwide, because of its attractive interest rates, variety of loan structure options, high loan-to-value ratios, and non-recourse guaranty structure. With both fixed and floating rate options available, it is a great product for most multifamily property types, including affordable housing, senior independent living, student housing, cooperative housing, traditional market rate apartments, and manufactured housing. It can also be used for mixed-use buildings where the other commercial units make up 20% or less of the gross income.
Fannie Mae Multifamily Programs
Fannie
offers both fixed and variable products for all property types and can go
nationwide, although primary and large secondary markets are preferred (i.e.
MSA populations of at least 200,000). There are 2 major FNMA programs under
which the majority of the products fall:
Standard DUS
Mortgage: The Standard DUS product is for the
purchase or refinance of existing, stabilized properties with 5+ units that
have a minimum loan amount of $5 million (or $7 million in eligible markets*).
Small Loan Program: The
Small Loans product is for the purchase or refinance of existing, stabilized
properties with 5-50 units and loan amounts between $750,000 - $5 million ($7 million in eligible markets*).
Structured Adjustable Rate Apartment Loan Program: On the other end of the spectrum from the Small Loan Program sits the Structured Adjustable Rate Program. This program has a minimum loan amount of $25 million!
* Eligible markets are Baltimore, Boston, Chicago, Los Angeles, New York, Sacramento, San Diego, San Francisco, San Jose, Seattle, Washington D.C.
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FNMA Feature Overview |
|
|
Eligible Properties |
Market-Rate (Conventional)
Apartments |
|
Loan Terms |
5-30 years
(fixed-rate), 7 years (adjustable rate) |
|
Amortization |
Up to 30 years |
|
Interest-Only |
Part- or full-term
available on fixed-rate products (depends on LTV) |
|
Max LTV |
55% (Tier 4), 65% (Tier 3), 75-80% (Tier 2) |
|
Min DSCR |
1.55x (Tier 4),
1.35x (Tier 3), 1.25x (Tier 2) |
|
Recourse |
Usually non-recourse except for “bad boy” carve-outs |
|
Interest-Only Period |
Available on a
case-by-case basis |
|
Prepayment Penalty |
Yield maintenance or Step-Down (for additional spread or
fee) on fixed-rate terms; 1% fee (after 1 year lock-out) on adjustable terms |
|
Loan Assumption |
Available, with
pre-approval and assumption fee (usually 1%) |
|
Rate Lock Available |
Yes, through the Streamlined Rate Lock |
|
Loan Servicer |
Originator, or may
be transferred to a third party |
|
Secondary financing |
Yes, 12+ months after closing, through FNMA Supplemental Loan Program |
|
Insurance & Tax Reserve |
Required unless
low-leverage (typically 65% LTV or less) |
|
Capital Reserves |
Required for most properties over 65% LTV, especially
older properties or properties with deferred maintenance |
Underwriting Requirements
|
Property Requirements |
|
|
Property Types |
Market rate apartments, affordable housing, senior
housing, student housing, cooperative housing, and manufactured housing
communities |
|
Location |
Primary or
secondary MSAs (populations of 200,000+) with some exceptions for tertiary
markets |
|
Occupancy |
At least 90% for 90 days prior to funding for completed
properties; 75% physical occupancy for newly constructed or renovated
properties. |
|
Units |
5+ for
multifamily, 50+ pad sites for manufactured housing |
|
Loan amount |
$750,000 minimum, although most lenders start at $1
million |
|
Financials |
Strong, increasing
NOI (excluding unusual expenses) |
|
Leases |
12-month leases; parental guarantees for student housing |
|
Pre-Review Markets |
Michigan, Indiana,
Ohio (excluding Columbus) Las Vegas, Tulsa, Atlanta, Houston, Odessa,
Midland, San Bernardino, Riverside, Kennewick, Oklahoma City, Atlanta, Puerto
Rico, U.S. Virgin Islands, Guam, Fayetteville, Wyoming, New Orleans, Wichita
Falls. |
|
Borrower Requirements |
|
|
Experience |
Required, unless a waiver is granted |
|
Net Worth |
Equal to loan
amount requested |
|
Liquidity |
9-12 months debt service (after any required cash
injections) |
|
Credit |
FICO of 680+ with
no recent credit events |
|
Citizenship |
Credit-worth single-asset US Borrower with all US
ownership; indirect foreign ownership okay with proper structuring of entity
and parent |
FNMA Multifamily Loan Documentation
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Miscellaneous Loan Documents
Please note that these documents are for informational purposes only. Your loan documents may look different than the ones presented, depending on the location of the sponsor(s) and/or property, and additional schedules or documentation may be required. RPA Commercial Loans is not responsible for any changes to the documents or additional documentation that may be required by Fannie or the funding lender outside of what is presented. Making these documents available does not constitute a commitment to lend.