Freddie Mac Financing for Multifamily, Student Housing, Affordable Housing, and Senior Living 

Like Fannie Mae, Freddie Mac is a GSE, or government-sponsored entity. Freddie Mac multifamily loans are one of the most popular types of apartment financing available on the market today. They offer loans for property types including market-rate and affordable multifamily properties, student housing, assisted living, skilled nursing, and other senior living property types.

Just like Fannie Mae, Freddie Mac agrees to buy multifamily loans from lenders after they close. This reduces the amount of risk on a lender’s balance sheet. This is why lenders are willing to offer loans at such high leverages and low DSCRs.

Key insights about Freddie Mac apartment loans include:

• Terms: Freddie Mac’s offers LTVs up to 80% for market-rate properties, and up to 85% for affordable properties, terms up to 20 years with amortizations of 25+ years.

• Recourse: Freddie Mac multifamily loans are generally non-recourse with bad-boy carve-outs, so if the loan goes into default, the lender or servicer will be unable to repossess the borrower’s personal property to pay back the remaining loan balance.

• Requirements: To qualify for these “agency” loans, borrowers need strong sponsorship, a reputable property management company, and may also need previous multifamily ownership

• Loan Volume: In 2020, Fannie Mae provided a record $76 billion in multifamily loans to apartment investors across the country, with $7.8 billion of those loans going to affordable housing properties. Fannie Mae also provided $5.5 billion in manufactured housing community financing, much of it affordable.

• Affordable Housing Loans: Like HUD and Freddie Mac, Fannie Mae provides additional perks to affordable housing investors, including providing higher leverage, lower debt service ratio requirements, and options for investors utilizing Low-Income Housing Tax Credits (LIHTCs).

• Asset Classes: Freddie Mac provides a variety of financing programs for asset classes including student housing, seniors housing, and even mobile home communities. Freddie also has options for green housing, bridge loans, and small apartment loans.

Prospective Freddie Mac Multifamily Loan Terms for 2021

• Size: $1 million to $100 million+

• Terms: 5-25 years

• Maximum LTV: 75%-85% 

• DSCR: 1.20x+ required, as low as 1.00x for affordable properties 

• Term: Up to 25 years

• Amortization: Up to 30 years

• Interest Rates: Fixed and variable rates available, interest-only (I/O) options available 

Pros and Cons of Multifamily Freddie Mac Loans

Pros:

• Variety of low-interest fixed and variable-rate terms

• The majority of loans are non-recourse with bad-boy carve-outs (loans become full recourse if borrowers violate certain parts of the loan agreements)

• Yield maintenance, step-downs, and defeasance are offered as prepayment options

• Special loan options for student housing, seniors housing, mobile home parks, affordable housing, and low-income housing tax credits (LIHTC), among other situations

Cons: 

• Loans can take 90 days or more to close, with longer closing periods for larger loan amounts

• The loan sponsor generally needs to have a net worth (excluding their primary residence) of at least 100% of the loan amount

• Borrowers are typically not allowed to self-manage properties unless they have significant multifamily ownership and property management experience

Read Our Multifamily Investing Blog!