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Freddie Mac Guide to Multifamily and Commercial Real Estate Loans

Guide to understanding Freddie Mac loans in commercial real estate investing

Did you know that Freddie Mac’s total mortgage portfolio grew at a 22.4% annualized rate in December 2020? In the whole span of 2020, this growth rate was 17.6%, over double what it had been in 2019.

If you’re a commercial real estate investor, then you might be interested in how you can use the Freddie Mac Multifamily products to find a loan for your acquisition or refinance. You might also be asking yourself questions such as:

What is Freddie Mac? What are the benefits of Freddie Mac Multifamily loans? What types of Freddie Mac Multifamily loans are available?

If you don’t have the answers to these questions, you might not know if a Freddie Mac Multifamily loan is right for your commercial real estate investments. You also won’t be able to determine which type of loan is right for you.

That’s why we’ve put together this guide. Once you know everything you need about Freddie Mac Multifamily loans, you can choose the right one for you. Read on to learn more.

What Is Freddie Mac?

To understand how the commercial loans you get through Freddie Mac works, you first need to know what Freddie Mac is. This corporation—officially called the Federal Home Loan Mortgage Corp, and also referred to as FHLMC.

Freddie Mac came into existence in 1970, when it was chartered by Congress. It was created specifically so that money could be provided to mortgage lenders. This way, both multifamily housing, and property ownership would be accessible to middle-income Americans.

Freddie Mac does this by purchasing, guaranteeing, and securitizing mortgages, with the result of forming mortgage-backed securities.

What Are Freddie Mac Multifamily Loans?

In order to encourage Americans to get loans, the Freddie Mac Multifamily Loans program provides floating rate and fixed-rate loans to refinance or acquire different multifamily loan types. These types of loans are for properties such as affordable housing, senior housing, and more.

In this section, we’ll review the different types of loans you can get through this program. These are the conventional, small balance, targeted affordable housing, and seniors housing loans.

Conventional Loan

With the conventional loan, you can get floating-rate and fixed-rate loans. You can also get moderate rehab, value-add, and lease-up loans. Additionally, you can get structured loans, supplemental loans, and more.

These loans can be used for student housing, manufactured housing communities, and other types of housing.

We’ll start by reviewing the core conventional loans. These are the fixed-rate, float-to-fixed (two plus seven), and floating-rate loans.

Fixed-Rate Loan

The fixed-rate loan is used to cover loan amounts between $5 million and $100 million. However, smaller and larger amounts will be considered for this loan, starting at $1 million. They must have a tenant-in-common, limited liability, corporation, or limited partnership organizational structure.

Float-to-Fixed Rate Loan (Two-Plus-Seven)

This type of loan is perfect for assets that require light positioning. (Note that is not a requirement for this type of loan, however.)

As for the loan amount, there is no maximum. Prior to the rate lock, an index lock is available, which means you won’t have to worry about treasury rate increases prior to closing.

This loan is available for all Targeted Affordable Housing Optigo offerings and conventional offerings. However, it does not cover manufactured housing communities, seniors housing, student housing, or pre-stabilized assets.

Floating Rate Loan

The floating-rate loan usually covers amounts that are between $5 million and $100 million. However, other amounts that are less or more than these limits will be considered. They must have in common a tenant-in-common, limited liability company, corporation, or limited partnership organizational structure.

Additional Products and Assets

Outside of the core products, there are additional products and assets. The conventional products are the Structured Pool Transaction and Structured Pool Transaction Addendum.

The specialty assets include the HUD Section 8 Financing and the Manufactured Housing Community Loan. They also include the Manufactured Housing Resident Owned Community Loan and Student Housing Financing.

Specialty products include the Green Advantage, Lease-Up Loan, Moderate Rehab, Student Housing Value-Add, Supplement, and Value-Add.

Small Balance Loan Program

The small balance loan program makes it possible for you to get loans between $1 million and $7.5 million. It also streamlines processes such as funding, closing, underwriting, and pricing. These types of loans include Small Balance loans and Portfolio Deals.

Small Balance Loan

The Small Balance Loan can be used to cover amounts between $1 million and $7.5 million. You get both fixed-rate and hybrid ARM options, which last for 5, 7, or 10 years.

This type of loan is non-recourse. In certain markets, you get up to 80% when it comes to maximum LTV.

If you’re looking for an interest-only loan, this is available through the small balance loan program. The amortization period is 30 years. You also get the option of declining prepayment.

At application, coupon pricing is locked. The process of third-party reports and loan documents is fully streamlined, making your life easier so you can focus on running your real estate investments.

You have your choice of 12 Optigo lenders, and you get coverage from them all throughout the US. For the life of your loan, this lender will be your servicing partner.

Portfolio Deals

With Small Balance Loan Portfolios, you get many benefits. One of these benefits is that you get a dedicated Freddie Mac team on your side throughout the whole process, between quote and closing. 

Other benefits include a streamlined process, cost efficiencies, and customized pricing.

Targeted Affordable Housing

Targeted Affordable Housing loans are provided so that people can get loans in underserved areas. If you have low or very low income, you can get tax-exempt loans, bond credit enhancements, cash loans, and other types of loans. Let’s review some of the options available.

Bridge to Resyndication

The Bridge to Resyndication loan was created to support affordable housing preservation.

This is a 24-month loan. It can be extended for an additional six months if you get approval for the extension. This is an interest-only, floating rate mortgage.

There is also support available for mixed-used properties (as long as they are eligible).

Cash Loan for Affordable Housing Preservation

With this loan, you have certainty of execution. You can also get financing that is either floating-rate or fixed-rate.

This makes it easier to refinance or acquire affordable housing properties throughout the US. Financing is provided for multifamily properties that have income restrictions or regulatory rent.

This loan also can include transactions with affordability components such as tax abatements, Section 236 financing, Section 8 financing.

Also, there is support for mixed-use properties (as long as they are eligible).

Green Advantage

Green Advantage works with Freddie Mac Multifamily Optigo loans that are fixed-rate with 10-year terms. Options include C-PACE, Green Rebate, Green Certified, Green Retrofits, Green Up Plus, and Green Up.

Additional Products Available

The additional products available are HUD Section 8 Financing, Impact Gap Financing, NOAH Preservation Loan, Non-LIHTC Forwards, Tax-Exempt Loan, and Value-Add. As you can see, there are many options, even if it’s challenging for you to afford commercial real estate loans.

Senior Housing

Because senior housing is a bit more complicated than other types of real estate investments, Freddie Mac has created loans specific to senior housing. These loans are available for memory care, assisted living, and independent living properties.

Senior Housing Loan

The main product available is the Senior Housing Loan. This loan is specially designed for the refinance or acquisition of senior housing properties. This includes properties such as memory care, assisted living, and independent living properties.

It also includes senior properties that have skilled nursing available in a limited amount.

There are 5-year and 10-year loans, as well as ones that last up to 30 years available. These are fixed-rate loans. It’s also easy to finance senior housing properties if the acuity changes or expands.

Green Advantage 

With the Senior Housing Loan, you can use the Green Advantage program. It works with Freddie Mac Multifamily Optigo loans that are fixed-rate for 10 years.

By using the Green Assessment Plus and the Green Assessment, you can learn about how to save water or energy.

When the borrower (you) closes a loan, Freddie Mac will reimburse up to a maximum of $4,000 of the cost of this report.

Options with Green Advantage include the Green Rebate, C-PACE, Green Retrofits, Green Certified, Green Up, and Green Up Plus. It can help you to take a look at Freddie Mac’s Affordability Test.

Additional Specialty Products

There are additional specialty products that come under the Senior Housing Loan. These are the Lease-Up Loan and the Supplemental Loan. With the Lease-Up Loan, you can acquire or refinance a new property.

With the Supplemental Loan, you can get additional financing. With this type of loan, you have both the options of floating-rate and fixed-rate.

Keep in mind that this financing has to be placed in two situations. One of these is after the most recent prior supplemental loan. The other is at least 12 months after the first loan was originated.

Need More Information?

Now that you’ve learned about the different Freddie Mac Multifamily loan options, you might need more information.

Maybe you want to figure out which of these loans is best for backing your next real estate investment. Or maybe you want to learn about other types of loans. Whatever information you need, we’re here to help.

At CommonLoan, we’re experts when it comes to real estate loans. To learn more about how we can help you, contact us now.

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