Streamlined Refinancing for Current Fannie Mae Multifamily Borrowers

If you’re already a Fannie Mae multifamily borrower, and you want to refinance your property to extend the term of your loan or get a better rate, the Fannie Mae Choice Refinance program is a great option. Since your property already has Fannie Mae debt, Fannie offers a streamlined refinancing process, which can cut down closing time significantly, as well as potentially reduce your expenses during the refinance process.

Fannie Mae’s Choice Refinance program offers up to 80% LTV for traditional refinances, and up to 75% LTV for cash-out, with a minimum DSCR of 1.25x. Like most Fannie Mae multifamily loans, these loans are non-recourse with bad-boy carve-outs. They are also assumable with lender approval and a 1% lender fee.

However, Fannie Mae Choice Refinance loans aren’t available for all Fannie Mae multifamily borrowers; the lender must be the current servicer of the loan being refinanced, the property must be well maintained and stabilized as evidenced by the most recent property inspection. For the Borrower, and each Key Principal, Guarantor, and Principal, the Lender will report ACheck results, and obtain and review financial statements. In addition, Fannie Mae may not approve the loan if there are changes to the borrower’s legal structure or if area zoning regulations have changed.

Prospective Terms for Fannie Mae Choice Refinance Loans 2022

• Size: No minimums, determined by LTV and DSCR requirements

• Terms: 5-30 years 

• Amortization: 30 years (some deviations)

• Interest Rate: Both fixed and floating-rate options are available, interest-only (I/O) loans also available for qualified borrowers and properties

• Maximum LTV:  80%, 75% for cash-out refinances

• Minimum DSCR: 1.25x 

• Recourse:  Loans are non-recourse with standard “bad boy” carve-outs 

• Prepayment Options:  Yield maintenance/1% prepayment premium (may be waived once the yield maintenance period is finished) 

• Occupancy Requirements: 70% economic occupancy or 85% physical occupancy

• Eligible Properties:  Stabilized Fannie Mae-financed multifamily properties in good standing 

Pros and Cons of Fannie Mae Choice Refinance Loans

Pros:

• Low fixed and floating interest rates

• Faster underwriting/approval process than traditional loans

• Requires less documentation than bank, HUD, Freddie Mac, or original Fannie Mae loans

• Loans are non-recourse with bad-boy carve-outs

• Supplemental loans are available after 12 months

• Rate locks are available up to 180 days before closing

• Loans are fully assumable with lender approval and 1% fee

• Prepayment fees can often be wavied; if they are not, the prepayment penalty can be financed with the proceeds of the new loan.

• Properties typically do not require a Phase I Environmental Assessment

  Origination fees can be used to pay third-party expenses.

Cons:

• Replacement reserve (minimum of $250/unit per year), tax, and insurance escrows are typically required.

• Typically new third-party reports including Appraisal, Physical Needs Assessment (though they may be streamlined for Choice Refinances).

• New title insurance policy generally required

• 2% rate lock fee generally required (refunded after Fannie Mae purchases loan, usually around one month after closing)

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