Freddie Mac, a government-sponsored enterprise (GSE) that buys mortgages for pooling and sale as mortgage-backed securities has announced a new small balance multifamily loan acquisition program. The program, dubbed Small Balance Loan (SBL), kicked off during Freddie Mac’s seller/servicer conference in New Orleans, LA on October 9-10.
The program provides approved sellers/servicers with a dedicated platform to originate and sell loans secured by smaller rental properties. The program is similar to Fannie Mae’s multifamily Small Balance Loan program and should provide small balance apartment borrowers with more options for attractive, non-recourse, fixed-rate loans. The Freddie Mac program is eligible for apartment properties with five or more units and with loan amounts of $1 million-$5 million. This compares with Fannie’s loan limits of $750,000-$3 million ($5 million in certain metropolitan markets).
Freddie Mac’s nationwide program provides for 5-, 7- or 10-year fixed-rate terms with amortization up to 30 years. Partial- and full-term interest-only periods are available for low-leverage loans. Maximum loan-to-value is 80% and the minimum debt-service coverage ratio is 1.25x. The program has a net worth requirement equal to the loan amount and a liquidity requirement of nine months of principal and interest. The property must provide a minimum of 90% occupancy over the prior three months. These tests are identical to those found in the Fannie Mae Small Balance Loan program. Take a look here for a summary of the Freddie Mac Small Balance Loan program options and requirements.