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The Guide To The Types of Freddie Mac Multifamily and CRE 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? If you’re a commercial real estate investor, then you might be interested in how you can use 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 investment. 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 learn about Freddie Mac Multifamily loans, you can choose the right one for you.

What Is Freddie Mac?

To understand how commercial loans available through Freddie Mac work, you first need to know what Freddie Mac is. This corporation—officially called the Federal Home Loan Mortgage Corporation, is 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 issuing mortgage-backed securities.

What Are Freddie Mac Multifamily Loans?

In order to encourage Americans to obtain loans, the Freddie Mac Multifamily Loan program provides floating-rate and fixed-rate loans to refinance or acquire different multifamily property types. These types of loans are also for multifamily property sub-types such as affordable housing, senior housing, and more.

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

Conventional Loans

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

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

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

Fixed-Rate

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

Floating-to-Fixed Rate Loans (Two-Plus-Seven)

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

As for the loan amount, there is no maximum. Prior to 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 conventional offerings. However, it does not cover manufactured housing communities, senior housing, student housing, or pre-stabilized assets.

Floating Rate Loans

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

Additional Products and Assets

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

The assets include the HUD Section 8 Financing and the Manufactured Housing Community Loan. The Manufactured Housing Resident Owned Community Loan and Student Housing are available as well.

Specialty products include Green Advantage, Lease-Up Loans, 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 obtain 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 and Portfolio Loans.

Small Balance Loans

The Small Balance Loan can be used to cover amounts between $1 million and $7.5 million. Fixed-rate and hybrid ARM’s are available, which last for 5, 7, or 10 years.

This type of loan is non-recourse. In certain markets, you can qualify for up to 80% 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 when applicable. The option of declining prepayment is also available.

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

You can choose from 12 Optigo lenders and will receive coverage from them all throughout the US. For the life of your loan, this lender will be your servicing partner.

Portfolio Loans

With Small Balance Loan Portfolios, there are many benefits. One of these benefits is that you have access to a dedicated Freddie Mac team throughout the whole process, between quoting and closing. 

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

Targeted Affordable Housing

Targeted Affordable Housing loans are provided so people have access to loans in underserved areas. If you have low or very low income, you can qualify for 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 receive 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 Loans for Affordable Housing Preservation

This loan program is known for providing certainty of execution. You can also obtain 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 which have income restrictions or regulatory rent.

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

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

Green Advantage

Green Advantage works with Freddie Mac Multifamily Optigo loans which 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 Loans, Non-LIHTC Forwards, Tax-Exempt Loans, and Value-Add. As you can see, there are many options, even if it’s challenging for you to qualify for a commercial real estate loan.

Senior Housing

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

Senior Housing Loans

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 facilities.

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

There are 5-year and 10-year loan options, as well as those which last up to 30 years. 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 which have fixed rates for 10 years.

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

Upon closing the loan, Freddie Mac will reimburse up to a maximum of $4,000 towards the cost of this report.

Options with Green Advantage include Green Rebate, C-PACE, Green Retrofits, Green Certified, Green Up, and Green Up Plus. These can help you review Freddie Mac’s Affordability Test.

Additional Specialty Products

There are additional specialty products which are offered alongside 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 obtain additional financing. With this type of loan, you have the option of a floating-rate or fixed-rate.

Keep in mind that this financing is placed in two situations. One of these is after the most recent 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 financing 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 commercial real estate loans. To learn more about how we can help you, contact us now.

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